URBANIZATION IN PAKISTAN1
Economic theory suggests that Structural transformation usually takes place when resources are reallocated from low productivity agriculture to high productivity industry and services sectors. Cities and urban areas are the magnets for location of these sectors which benefit from migration of the surplus and underemployed labour. Rapid economic growth is therefore associated with urbanization. The pace of urbanization is, in turn, accelerated with a larger response of migration. Empirical evidence shows that no country has grown to middle income status without industrializing and urbanizing. None has grown to high income without vibrant cities. Between 1980 and 1998, 86 percent of the growth in value added in developing countries came from the manufacturing and services sector. Rapid productivity gains mainly reflected improvements in the industry and services. Between 1985 and 2005, the urban population in developing counties grew by more than 8.3 million a year. With falling costs of Transport and communication and a greater potential for exploiting scale economies, towns and cities have grown bigger and denser. However, these gains are neither guaranteed nor are automatic but are much dependent on how urbanization is managed. Urbanization can increase overall prosperity or produce congestion and squalor and widen the income disparities with the rural areas. The preoccupation with these disparities can in turn jeopardize competitiveness. Institutions, infrastructure and incentives provide the foundation for urbanization. China has successfully managed both rapid growth and pace of urbanization by investing in all these three dimensions. On the other hand some African countries have experienced urbanization without growth. Research by the World Bank presented in the World Development Report 2009 shows that three attributes of Development – geographic unevenness, circular causation and neighborhood effects – have not received much attention. The first attribute of development – geographic unevenness implies that governments generally cannot simultaneously foster economic production and spread it out smoothly. Circular causation makes it possible for Rising concentrations of economic production to become compatible with geographic convergence in living standards. The market forces of agglomeration, migration and specialization can yield both a concentration of economic production and a convergence of living standards. The third attribute of neighborhood effects suggests that spillovers point to the promise for surmounting the handicap of unevenness and circularity. Economic integration is an effective and the most realistic way to harness the immediate benefits from concentration to achieve the long-term benefits of convergence. The growth of economies and population density in towns and cities lead the countries to reach per capita income of $3,500. At that point they cross over to the category of upper middle income group. As countries develop, economic density in some places increases as more people move to live or near towns and cities. The urban share of the population rises to 50 percent when countries become upper middle income or the other way around. The cause and effect relationships are not clearly established. These spatial transformations are closely related to sectoral transformation from agrarian to industrial to services. Evidence indicates that the shift from farming to industry is helped, not hurt, by healthy agriculture which helps towns and cities prosper. People move to make their lives better. But when agriculture is doing well, migration makes not only the migrants better off, but also the villages they leave and the cities in which they settle. Urbanization facilitates agglomeration as moving goods, people and ideas become cost effective. Agglomeration economies concentrate manufacturing production facilitating growth of services sector. Productive...
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