Is Urbanization Causing Income Inequality and Poverty

1. Is Urbanization Causing Income Inequality and Poverty? Eric Harvey ECON 0428

2. Background Urbanization�concentration of people in cities Industrial Revolution Acceleration of urbanization in last 40 years Urbanization in Kenya Why to the poor move in and the rich move out? Implications for poverty and inequality

3. Why Cities??? Non-economic incentives Dense population in rural areas Lure of better economic conditions Economic incentives Higher wages Better employment opportunities Government services

4. Urbanization the Kenyan Way Migratory group: More skilled workers Urban areas more economically developed than rural Jobs more difficult to find�rising unemployment Nonmigratory group: Unskilled workers and large families�cost of cities are a deterrent. Fertility rate declining Social amenities/prospect of a better life are a lure

5. Africa�increasing human capital but not rural development increases urbanization Kenya- Education and urban vs. rural development

6. Cities: a source of poverty or a magnet for the poor? Poverty rising in cities: Rising crime Low-quality schools Wealthy flock to suburbs Urban increase in poverty; significant overall decrease

7. An exacerbation of poverty and inequality Geographic concentration of poverty A growing percentage of poor live in cities Technological advances further class segregation Rising social tension and conflict

8. Four trends leading to greater inequality Computerization of production Transition from labor intensive to capital intensive Globalization of capital and labor markets Capital seeks highest returns, lowest risk Labor�fierce international competition Fragmentation of consumer markets: specialization Labor markets segmented in developed world putting downward pressure on wages Decentralization of government�localization of tax revenues Poor areas receive less for education

9. Concluding Thoughts Urbanization is rapidly accelerating Cities attractive to poor: Greater economic opportunities Government and public services Implications for poverty and inequality: Overall positive impact on global poverty Concentration of poverty Intensification of social tensions, inequality and violence