How Urban Concentration Affects Economic Growth

Abstract

April 2000 - If urban overconcentration really is an issue, it ought to affect economic growth rates in a robust, consistent fashion. And it does. Not only is there an optimal degree of urban concentration that varies with country income, but departures from optimal concentration result in substantial growth losses. Overconcentrated countries can reduce concentration by investing in interregional transport infrastructure - in particular, increasing the density of road networks. Henderson explores the issue of urban overconcentration econometrically, using data from a panel of 80 to 100 countries every 5 years from 1960 to 1995. He finds the following: · At any level of development there is indeed a best degree of national urban concentration. It increases sharply as income rises, up to a per capita income of about

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