Urbanization and the Wealth of Nations

TLDR

Urbanization is strongly linked to higher income and productivity through economies of scale and richer markets, yet rapid growth can bring crowding and environmental degradation. The study finds that urbanization does not influence economic growth, suggesting no basis for promoting or discouraging it.

Abstract

The proportion of a country's population living in urban areas is highly correlated with its level of income. Urban areas offer economies of scale and richer market structures, and there is strong evidence that workers in urban areas are individually more productive, and earn more, than rural workers. However, rapid urbanization is also associated with crowding, environmental degradation, and other impediments to productivity. Overall, we find no evidence that the level of urbanization affects the rate of economic growth. Our findings weaken the rationale for either encouraging or discouraging urbanization as part of a strategy for economic growth.