Urbanization and Structural Transformation

Series 2
URBANIZATION
AND STRUCTURAL
TRANSFORMATION
Urbanization and Structural Transformation
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Acknowledgements
Core Team
Director: Oyebanji Oyelaran-Oyeyinka
Principal Authors: Oyebanji Oyelaran-Oyeyinka and Kaushalesh Lal
Contributors and Advisors: Victoria Chebet, Oluyomi Ola-David, Shampa Paul, Gbemisola Adetoro,
Gulelat Kebete
Support Team: Jacqueline Macha, Mary Dibo, Anne Muchiri, Pamela Odhiambo, Adedoyin Luwaji and
Abdulmalek Al-Hamedi
Design and Layout: Fredrick Maitaria
Editors: Dominic O’Reilly,
Sponsor: International Ecological Safety Collaborative Organization (IESCO)
Printer: UNON, publishing services section, Nairobi

An overview of Mexico City. © UN-Habitat/Julius Mwelu
Introduction a significant share of the national wealth. For

Urban areas are crucial for national development. example, Seoul, Budapest and Brussels respectively
According to conventional wisdom, no developed accounts for over 45 per cent of the GDP of South
country has achieved its level of development or Korea, Hungary and Belgium4. In other countries,
prosperity without urbanizing but this statement it is a group of cities that contributes a significant
must be qualified, it is about sustainable share of GDP. For example, in South Africa, six
urbanization. Most of a country’s wealth is created major cities collectively account for 55 per cent of
in its cities, hence the maxim that cities are the the GDP. The case of China is quite remarkable,
engines of economic growth and development. with 50 per cent of the GDP generated in the
Productive cities are engines of economic growth coastal areas that constitute 20 per cent of the
where critical sectors have replaced low-productivity territory5. For all cities, their contribution to GDP
agriculture and experienced high productivity is greater than their contribution to the national
growth in industrial manufacturing. population. The disproportionate economic
contribution of urban areas is often ignored in
Cities account for about 70 per cent of global development policy or not duly integrated in
GDP1. Economic activities in urban areas account for development strategies and plans.
as much as 55 per cent of the GDP in low-income
countries, 73 per cent in middle-income countries, Besides the positive contribution of cities to
and 85 per cent in high-income economies2. growth, urban areas are associated with higher
Indeed, it is anticipated that 80 per cent of levels of income. Indeed, the relationship between
future economic growth will be in cities3. In the level of urbanization and per capita income
some countries, a single city could account for across countries is positive. Figure 1 suggests
1 World Bank, 2009a

2 UN-Habitat and DFID, 2002 4 UN-Habitat, 2010
3 SIDA, 2006 5 World Bank, 2009d
1
Figure 4.1.4
Figure 1.1: Urbanization and GDP
100
90
80
70
60
% urban
50
40
30
20
10
0
0 10,000 20,000 30,000 40,000 50,000 60,000
GDP per capita (US$)
Source : UN (2010), percentage urban ; World Bank (2010), GDP per capita
Figure 4.1.2
14
that few countries have reached income levels per cent and 29 per cent urbanized respectively6.
Log of Value Added per worker
of USD13 10,000 per capita before becoming 70

per cent urbanized. Among developing regions, There are however, exceptions. Figure 1.1 also
12
few countries attain income levels of USD 5,000 shows that there are several countries with
before 11becoming 60 per cent urbanized (Annex relatively high levels of urbanization but low
1). Corresponding
10 figures for Africa, Asia and levels of income. This implies that high levels of
Latin America and Caribbean can be gleaned urbanization alone are not sufficient to generate
9
from Annex 1. What this shows is that countries high levels of prosperity. Such countries might not
urbanize8as they get richer and as they accumulate be drawing on the full benefits of agglomerations7,
skills and infrastructural assets to modernize. or that urbanization might be occurring in the
7
55.07 55.08 55.09 55.10 55.11 55.12 absence of long-term
55.13 55.14 economic
55.15 growth or in a
Services
From the figure 1.1 below, urbanization correlates situation
Degree of Urbanization where growth has been too low. The
Manufacturing
strongly with wealth generation at the early stages latter is common in sub-Saharan Africa, and
Industry
13.0
of development but this relationship weakens has been characterized by rapid urbanAgriculture growth
as countries get richer. The positive relationship occurring within the context of low economic
12.5
between urbanization and income also applies at growth8, poor agricultural performance, climate
Log of Employment
the regional
12.0 level. The regions that have the highest change, rising unemployment, financially-weak
levels of urbanization are the ones with the highest municipal authorities incapable of providing basic
levels11.5
of GDP per capita. Among developing regions,
Latin America and Caribbean (with 78 per cent of 6 UN-Habitat, 2010
11.0
its population residing in urban areas) has a GDP per 7 Polese, 2000; 2005
8 Between 1970 and 1995, Africa’s urban population grew at
capita10.5
of USD 4580 as against USD 601 and USD 647 5.2%, while GDP per capita fell by an annual rate of 0.66%
for sub-Saharan Africa and South Asia, which are 36 (Fay and Opal, 2000)
10.0
55.07 55.08 55.09 55.10 55.11 55.12 55.13 55.14 55.15
2
Degree of Urbanization
Figure 4.1.4
services, poor governance and the absence of Structural Transformation and Sustainable
coherent urban planning policy that integrates Urbanization
economic, social and physical planning9. Under Urbanization is one of the most significant global
such conditions, “… rapid urban growth… has trends in the 21st Century. More than 50 per cent
been an inevitable recipe for the mass production of the world population now lives in urban areas,
of slums”10. while about 5 billion people or 60 per cent of
the world’s population will live in urban areas by
Figure 1.1 further indicates that, when countries 2030. Approximately, 90 per cent of world urban
reach urbanization levels of more than 70 per cent population growth between now and 2030 will
the link between urbanization and income weakens. take place in developing countries. Hence, cities are
Beyond this point, increasing levels of urbanization the locus of significant global challenges.
contribute little to income. This suggests that there
are other key factors besides the level of urbanization Sustainable urbanization is known to be a vehicle
that contribute to the prosperity of cities. Some for national economic and social transformation. By
of these factors relate to appropriate urban policy, sustainable urbanization we mean the transition of
planning, design, management and governance, rural-urban landscapes that structure both rural and
as well as the existence of institutions capable of urban economy, ecology and society in ways that
responding to the problems, consequences and reward the present generation with higher quality
challenges associated with rapid urbanization. of life but without endangering and diminishing
the living standards of future generations. This
Given the size of the contribution of cities to the structural shift is underpinned by proper planning,
national economy, the future of African countries supported by enforceable legal mechanisms and,
will be determined by the productivity of urban by so doing, brings about rapid economic progress
areas and the extent to which urban growth and the equitable development of citizens. When
and the accompanying challenges are managed. rural-urban shift is properly managed alongside
Developing countries that want to grow must industrialization and planned urban space, it tends
engineer sustainable urbanization. There are at to lead to higher productivity and, eventually,
least three ways by which this can be achieved11. rising living standards and better quality of life.
Sustainable urbanization spawns cities that evolve
The first is to nurture the growth of high- into centres of change and innovation, mainly
productivity activities particularly manufacturing because the concentration of people, resources and
followed by services, both of which benefit activities support human creativity.
from agglomeration economies. The sectoral
composition of countries that have experienced However, research has shown that there are a
long-term growth shows that the urban sector number of countries that are highly urbanized
in the form of manufacturing and services led without having seen a large shift of economic
the growth process. In developing countries, 86 activity towards manufacturing and services in most
per cent of total growth in national value-added developing countries. This phenomenon will be
between 1980 and 1998 came from the urban discussed in this study.
sector growth, specifically industry, namely and Successful countries that have been able to sustain
services12. a rapid transition out of poverty, due to a rapid rise
of productivity in the agricultural sector in ways that
9 Cheru, 2005; Barrios et al, 2006; Annez et al, 2010 transformed the rural-urban economies, have mostly
10 Davis, 2004, pp. 10-11 achieved sustained urbanization. Conventional
11 Spence, 2008; Oyelaran-Oyeyinka and GehlSampath, 2010
12 National Research Council, 2003 cited in Annez and Buckley,
wisdom interprets this process as a successful
2008, p.9 structural transformation, where agriculture (through
3
Ain Beni Mathar Integrated Combined Cycle Thermo-Solar Power Plant, Morocco. © World Bank/Dana Smillie
higher productivity) provides food, surplus labour fastest-growing nations (which are South Korea
with skills and even savings for the process of and China), the latter has equally rising wealth
urbanization and industrialization. Clearly, a vibrant but has seen little growth in income per capita
agricultural sector raises labour productivity in over the years. Generally, in developing countries
the rural economy, pulls up wages and gradually urbanization has taken place in cities of all sizes.
eliminates the worst dimensions of absolute poverty.
Concomitantly, the process also leads to a gradual The Convergence of Urbanization and
decline in the relative importance of agriculture to Structural Change
the overall economy, as the industrial and service Structural transformation is defined as the
sectors grow even more rapidly, partly through development of an economy’s structure from
stimulus from a modernizing agriculture and low productivity and labour-intensive activities
migration of rural workers to urban jobs13. to higher productivity, capital and skill-intensive
activities. It involves a long-term shift in the
Most natural resource exporters in Africa and fundamental institutions of an economy and helps
elsewhere do not conform to the standard model to explain the pathways of economic growth and
of urbanization14. For example, in 2010, Asia and development.15 In technical terms, four essential
sub-Saharan Africa were both at the same level and interrelated processes define structural
of urbanization; while the former recorded the transformation in any economy:
13 Timmer, 2007; Timmer and Akkus, 2008

14 Gollin, Jedwab and Vallarta, 2013 15 Etchemendy 2009; McMillan, Rodrik and Verduzco-Gallo, 2013
4
(i) a declining share of agriculture in GDP and namely; (1) change in productivity due to structural
employment change and (2) intra-sectoral productivity growth.
(ii) a rural-to-urban migration underpinned by rural The analysis helps in quantifying the association
and urban development between labour productivity and structural
(iii) the rise of a modern industrial and service transformation.
economy
(iv) a demographic transition from high rates of Urbanization without Change in Labour
births and deaths (common in underdeveloped Productivity in Africa
and rural areas) to low rates of births and Recent empirical evidence suggests that structural
deaths - associated with better health standards change could take place without much change
in developed and urban areas in labour productivity; this is the case with many
African countries. One of the reasons for this
In sum, the process leads to the reallocation of phenomenon is that peculiar urban dynamics occurs
economic activities across three broad sectors with little change in deep-going type of economic
(agriculture, manufacturing and services) that structure that accompany transitions observed
accompany the process of modern economic in industrial settings, but is caused largely by the
growth and the changes to the structures of the export of natural resource based products which
economy and society. Africa tends to specialize in.
Productivity Growth results from A recent study that focused on structural

Sustainable Urbanization transformation in eleven Sub-Saharan African
Structural transformation is characterized by the countries examined its implications for productivity
transition of an economy from low productivity growth during the past 50 years. They found
and labour-intensive economic activities to higher that the expansion of manufacturing activities
productivity and skill-intensive activities. The driving during the early post-independence period led
force behind structural transformation is the to a growth enhancing reallocation of resources
change of productivity in modern sectors which are but the process of structural change was stalled
dominated by manufacturing and services. in the mid-1970s and 1980s. Growth rebounded
in the 1990s but instead of expanding industrial
Structural change is equally attended by the activities, workers mainly relocated to the service
movement of the workforce from labour-intensive industries rather than manufacturing. The present
activities to skill-intensive urban-based ones. The study analyzes the reasons for stagnant or
key constraint to the movement of labour from declining productivity in modern sector, usually
rural to urban space is the lack of opportunities manufacturing, in Africa16.
in skill-intensive sectors such as manufacturing.
When labour migrates to cities with little or no Urbanization Poverty and Employment
opportunities, available labour is underemployed or Employment creation and structural economic
employed inefficiently. transformation are amongst the two major
challenges at the forefront of current African
Clearly, the analysis of productivity change growth and development strategies. At the micro
is of utmost important to our understanding level, employment creation provides opportunities
of the causes of urbanization and structural for earnings and underpins increases in household
transformation. This study uses the ratio of value expenditures and secure livelihoods. At the
added to total employment in a particular sector macro level, development occurs through the
as a measure of labour productivity. Labour
productivity is decomposed into two components, 16 deVries et. al. 2013
5
reallocation of labour across sectors toward those Empirical Analysis of African Countries
with the greatest growth potential and the highest To our knowledge, little or no systematic empirical
productivity. Jobs also facilitate social (such as work has been done to identify the causal
female wage employment) and political (seeking relationship between structural transformation
identity) transformations. However, it is not easy to and urbanization in ways that foster economic
achieve sustained employment generation17. development. It is argued in this study that the
association is mutually reinforcing. In order
African countries will achieve high and sustained to establish a causal relationship, measurable
economic growth rates alongside improved levels indicators are needed. From the perspective of
of social development, only if productivity changes industrialization, labour productivity is considered
are based on widespread economic diversification18. an appropriate proxy. The sources of productivity
The achievement of development goals and growth are numerous. For instance, optimum
higher living standards will therefore depend on allocation of resources and technological
the ability of countries to foster entrepreneurship advancement are expected to lead to higher
and promote innovation, including the spread, productivity. Industrial policies coupled with
adaptation and adoption of pre-existing know-how human resource development initiatives could
and techniques, services, processes and ways of also lead to higher productivity. The changes
working. Unfortunately, much of the growth in low in productivity within various sectors result in
income countries over the past decade has not led structural change with respect to employment and
to structural changes. contributions of sectors to total value added or
GDP growth.
About 70 per cent of the total population in large
metropolises lives in slum communities. Research This study proposes to quantify associations
revealed that there is a negative correlation between urbanization19 and quality of life which
between informal employment and GDP per is measured by human development index (HDI20).
capita; hence, informal growth tends to be growth- The HDI is a geometric mean of three indices,
reducing in developing countries. Thus, informal namely life expectancy, education, and income per
workers tend to be less well-off than those who capita. Life expectancy is measured as that at birth
work and live in more formal settings. whereas education index is based on mean years
of schooling and expected years of schooling. The
The formation of cities in developing countries income index is based on Gross National Income
is taking the shape of informality, illegality (PPP USD). HDI is considered a better measure of
and slums. Therefore, urban growth in most prosperity than simply income. It includes three
developing countries is strongly associated with main dimensions of prosperity. The non-availability
slum growth due to the lack of appropriate of HDI data before 2005 has limited us to use the
planning and affordable housing. Urban data of other indicators for 2005-2013. The analysis
inequality has grown due to differentiated wealth of sample economies of selected African, Asian and
concentration in cities. For example, statistics Latin American countries are presented respectively.
show that about 81.7 per cent of Africans live
on less than USD 4 per day, with 60.8 percent
falling below the USD 2 per day mark. There is
also the problem of high costs of informal services
provision and the absence of social safety nets. 19 Degree of Urbanization data have been taken from World
Development Indicator online.
20 HDI data is taken from UNDP. Website http://hdr.undp.org/
17 World Development Report, 2013 en/content/human-development-index-hd is accessed on
18 UNECA, 2011 November 2, 2015
6
Africa The magnitude of the coefficient represents the

Before going into analysis of each country separately, slope of line of association. The results show that
it is considered crucial to present the scenario slope of the line is different for all the countries. The
of quality of life and urbanization in the African slope is highest in the case of Ethiopia. It can be
continent. The relationship between HDI and degree inferred that Ethiopia witnessed the highest change
of urbanization has been quantified using Tobit in HDI controlling for urbanization. On the other
analysis and results are presented in Table 1.1. hand, the slope (0.036) of the line for Botswana is
the second lowest. Although Ethiopia and Botswana
Tobit has been preferred over Ordinary Least witnessed almost similar urbanization growth, the
Square (OLS) estimates as dependent variable, degree of urbanization at base year (2000) is 14.74
in that HDI is a truncated non-negative variable and 53.22 per cent respectively. It may be inferred
with 1 as upper limit. One of the differences that despite such a high level of urbanization in
between Tobit and OLS estimates is the iterative Botswana, HDI and urbanization is going hand in
procedure followed in Tobit resulting in more hand. This is not the case for South Africa, which is
robust and precise estimates while base results at the comparable level with Botswana.
of Tobit are similar to that of OLS. It can be
seen from the table that the coefficient of The slope of line for Nigeria is the lowest (0.005).
degree of urbanization is statistically significant The association between HDI and urbanization
at 1 per cent level (highest level) for all the in Nigeria is similar to that of South Africa as
countries except South Africa where the level of the degree of urbanization changed from 39.07
significance is 5 per cent, suggesting that the in 2005 to 46.09 per cent in 2013 while HDI
association between the two is very strong in all changed from 0.47 to 0.50 only. Looking at GDP
the countries. per capita in South Africa one can think that the
potential for expansion is less but that is not the
It can be seen from the table that coefficient case in Nigeria; urbanization is increasing rapidly
of degree of urbanization is positive for all the but its contribution to national income is not
sample countries suggesting that there is a positive commensurable. As is clear from structural change
association between HDI and degree of urbanization. in Nigeria, the focus has been on the agriculture
Table 1.1: Economic Development and Urbanization in Africa
DEGREE OF URBANIZATION
COUNTRY CONSTANT TERM LOG LIKELIHOOD SIGNIFICANCE LEVEL
COEFF. T-VALUE P>|T|
Botswana -1.364 0.036 17.26 0.00 35.879 0.00
Ethiopia -0.256 0.038 10.15 0.00 28.801 0.00
Ghana 0.013 0.011 21.68 0.00 41.389 0.00
Kenya 0.114 0.017 18.59 0.00 40.965 0.00
Nigeria 0.277 0.005 11.89 0.00 40.054 0.00
South Africa 0.270 0.006 3.01 0.015 30.015 0.011
Tanzania 0.074 0.014 32.72 0.00 43.802 0.00
Uganda 0.080 0.027 10.53 0.00 34.280 0.00
Note: Dependent variable is HDI
7
An over view of Nairobi, Kenya by night. © UN-Habitat/Julius Mwelu
sector where the productivity and contribution very little change in HDI although the degree of
to national income is low but the sector provides urbanization changed to 56.94 per cent in 2013. It
employment opportunity to a large population. may be inferred that the contribution to economic
The remainder of the section presents analysis of development by new migrants is comparatively low.
each country separately.
Figure 1.3 depicts the linkages between structural
Botswana transformation measured by growth in value
The relationship between economic development added per worker, subsequent productivity and
and degree of urbanization in Botswana is employment with the degree of urbanization.
depicted in Figure 1.2 (Appendix I). Other forms of
associations such as linear, log-linear, and power It can be seen from the figure that the highest
functions were tried. The functional form that gave productivity has been in the industrial sector
highest R-square has been considered the best fit. while the lowest has been in agriculture. As far as
Figure 1.2 shows that the association between the productivity is concerned, almost all the sectors
two is quadratic in nature with very high R-square. witnessed moderate growth during 2005-2013.
The quadratic form of association suggests that the Looking at the sector-wise employment scenario,
rate of change of HDI becomes inelastic to change it can be noticed that employment in agriculture
in degree of urbanization at a certain level of HDI. remained highest during 2005-13. Despite being
That level is defined as the threshold level of HDI, the least productive, the sector is important from
marked by ’T’ in’’ figure 1.2. It can be seen from the point of view of employment generation. The
the figure that it reached to threshold level of HDI services sector which held a second position in
at 0.678 in 2011 when the degree of urbanization providing employment in 2005 provided almost
was 56.47 per cent. Since 2011 there has been as much employment to as many persons as did
8
0
0 10,000 20,000 30,000 40,000 50,000 60,000
GDP per capita (US$)
Figure 1.3: Degree of urbanization, productivity and employment in Botswana

Figure 4.1.2
14
13
12
11
10
7
55.07 55.08 55.09 55.10 55.11 55.12 55.13 55.14 55.15 Services
Degree of Urbanization Manufacturing
Industry
13.0
Agriculture
12.5
Log of Employment
12.0
11.5
11.0
10.5
10.0
55.07 55.08 55.09 55.10 55.11 55.12 55.13 55.14 55.15
the agriculture sector in 2013. Hence, the Figure 4.1.4

services Ethiopia
10.0
sector may be considered as the best in terms The association in the case of Ethiopia is presented
9.5
of employment creation. However, in terms of in Figure 1.4 (Appendix I). The figure shows that
productivity,
9.0 it is the second lowest after industrial the rate of change of HDI after 2011 is marginal. It
sector.
8.5Although the productivity of the industrial reached to threshold level of HDI at 0.42 in 2011
sector is the highest, the employment numbers while the degree of urbanization (DU) was 17.74 per
8.0
there have been declining rapidly. This has resulted cent. Since then, the DU has changed to 18.59 per
7.5
in it having the lowest share of employment in cent while HDI changed to 0.44 in 2013.
2013.7.0The rapid decline in employment in industrial
sectors
6.5needs to be a concern of policy makers in The associations of the degree of urbanization with
Botswana.
6.0 The manufacturing sector had similar productivity and employment change are depicted
productivity15.70
levels to15.71
that of15.72
services15.73
sector was
15.74 in Figure
15.75 15.761.5. It can be 15.78
15.77 seen from the Services
figure that the
the lowest employer in 2005 and has maintained
Degree of Urbanization association between productivity in the industrial
Manufacturing
its employment level in 2013. It can be inferred sector is negative, which suggests that high
Industry
from 18the analysis that services sector has mainly productivity jobs have reduced over aAgriculture
period of time
contributed to urbanization in Botswana. The though the degree of urbanization has increased.
17
situation in Botswana after 2011 may be termed as The figure suggests that employment in the industrial
og of Employment
economic
16 growth-less job creation. sector has also increased. It may be inferred that high
15
9
14
Log of Value Added per w
12
11
10
9
value-added jobs are being replaced by low value- been decreasing. The trend is similar to that of the
added ones resulting in reduction in productivity and industrial sector. All the sectors experienced a positive
8
increase in employment. trend in employment with an increasing degree of
7 urbanization, although the growth of employment in
55.07 55.08 55.09 55.10 55.11 55.12 55.13 55.14 55.15
The productivity in the services sector was almost agriculture has been less compared toServicesother sectors.
static during 2005 to 2013 but the employment The analysis suggests that the migration of workers
Industry
in the
13.0sector has experienced positive growth. from agriculture to other sectors is taking place and
Agriculture
With growing urbanization and employment, resulting in an increase in urbanization.
the 12.5
sector has been able to maintain productivity
Log of Employment
levels. This could have been achieved by The migrant workers are being absorbed into
12.0
providing appropriate skills to the youth, who the industrial and manufacturing sectors at low
could be absorbed in the sector.
11.5 value-added activities and that is against the true
spirit of structural transformation. The decline in
11.0
Productivity in the manufacturing sector, however, productivity in industry and manufacturing sectors
has declined, although it maintained third resulted in a lower contribution to the national
10.5
position during 2005-2013. Employment in the income, thereby making HDI inelastic to growth
sector
10.0experienced a positive growth rate , which of urbanization. This situation may be regarded as
55.07 55.08 55.09 55.10 55.11 55.12 55.13 55.14 55.15
suggests that high value-added activities have economic growth-less job creation.
Figure 1.5: Degree of urbanization, productivity and employment in Ethiopia
Figure 4.1.4
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
6.0
15.70 15.71 15.72 15.73 15.74 15.75 15.76 15.77 15.78 Services
Industry
18
Agriculture
17
Log of Employment
16
15
14
13
12
15.70 15.71 15.72 15.73 15.74 15.75 15.76 15.77 15.78
Figure 4.1.6
9.00 10
rker
8.75
Log of Value Added per w
9.0
8.5 Urbanization and Structural Transformation
8.0
7.5
Ghana
7.0
activities is to provide skill upgrade opportunities
Figure 1.6 (Appendix I) depicts the relationship to youth that help them to be absorbed in highly-
6.5
between development and urbanization in Ghana. productive economic activities.
6.0
It can be seen from the figure that urbanization
15.70 15.71 15.72 15.73 15.74 15.75 15.76 15.77 15.78
and HDI are going hand in hand despite the fact Although employment in the servicesServicessector
Ghana attained the urbanization level of 52.74 per has recorded a positive growth, productivity in
Industry
cent and
18 HDI (0.573) in 2013. Findings suggest that the sector has witnessed a negative trend with
Agriculture
additional degree of urbanization commensurately increase in degree of urbanization. The decline in
17
contributes to national income. productivity suggests that the additional workforce
Log of Employment
absorbed in the sector is engaged in low productive

16
Figure 1.7 presents the association of urbanization activities. This is to some extent strange as workers
with value
15 added and employment. It can be seen in the industrial sector are absorbed in high
from the figure that value added and employment productive jobs; and in the services sector, they are
14
in industrial sector increased with the degree of absorbed in low-value activities. One of the reasons
urbanization. Therefore, it may be inferred that the could be the size of employment in both the sectors.
13
sector is not merely contributing to employment The level of employment in the services sector is
12 employment in high value-added activities.
but also much higher than in the industrial sectors.The
15.70 15.71 15.72 15.73 15.74 15.75 15.76 15.77 15.78
One of the ways to generate employment in such services sector encompasses telecommunications,
Figure 1.7: Degree of Urbanization, productivity and employment in Ghana
Figure 4.1.6
9.00
8.75
8.50
8.25
8.00
7.75
7.50
7.25
7.00
47.31 47.32 47.33 47.34 47.35 47.36 47.37 47.38 47.39 Services
Industry
16.0
Agriculture
15.5
15.0
Log of Employment
14.5
14.0
13.5
13.0
12.5
12.0
47.31 47.32 47.33 47.34 47.35 47.36 47.37 47.38 47.39
Figure 4.1.8
12.5 11
rker
8.50
Log of Value Added per

8.00
7.75
which
7.50is expanding fast and might have generated a has increased with the degree of urbanization. The
lot of low-skilled jobs. Consequently, productivity of results presented in Figures 1.6 and 1.7 suggest that
7.25
the sectors has witnessed a declining trend but has increasing productivity with degree of urbanization in
7.00 all the47.37
sectors47.38
has resulted in better national income
generated a47.31
lot of employment.
47.32 47.33 47.34 47.35 47.36 47.39 Services
and better HDI. The kind of structural change taking
The manufacturing sector holds the third position place in Ghana is contributing to urbanization with
Industry
from the point of view of value added as well as
16.0 improved quality of life.
Agriculture
employment.
15.5 The employment level and productivity
have increased with the increase of degree of Kenya
15.0
Log of Employment
urbanization. Increasing productivity of industrial Figure 1.8 (Appendix I) depicts the linkage
and14.5
manufacturing sectors might have resulted between economic development and the degree
in higher
14.0 per capita income, which is captured in of urbanization in Kenya. It can be seen from the
Figure
13.51.6. The agriculture sector on the other hand figure that degree of urbanization and HDI are
is the least productive but has the highest levels of increasing proportionately. The pattern of growth
13.0
employment. Nevertheless, with the higher degree of of urbanization and HDI in Kenya is similar to that
12.5
urbanization employment in services sector is rising of Ghana. In both countries, HDI has not reached
12.0 employment in the agriculture sector.
to surpass to the threshold level where it becomes inelastic to
47.31 47.32 47.33 47.34 47.35 47.36 47.37 47.38 47.39
Moreover, productivity in the agricultural sector degree of urbanization.
Figure 1.9: Degree of Urbanization, productivity and employment in Kenya
Figure 4.1.8
12.5
12.0
11.5
11.0
10.5
21.68 21.69 21.70 21.71 21.72 21.73 21.74 21.75 21.76 Services
Industry
16
Agriculture
15
Log of Employment
14
13
12
21.68 21.69 21.70 21.71 21.72 21.73 21.74 21.75 21.76
Figure 4.1.10
17 12
rker
12.0

11.5
The11.0
association of productivity and employment is least productive, provides employment to a large
with the degree of urbanisation (DU) in Kenya is population. Like productivity, employment in these
presented in Figure 1.9. sectors has also registered positive growth with
10.5 respect to urbanization.
21.68 21.69 21.70 21.71 21.72 21.73 21.74 21.75 21.76 Services
It can be seen from the figure that productivity has
increased or remained static in all the sectors except It may be inferred from the findings that structural
Industry
industry
16 with increase in DU. The productivity in change in Kenya is contributing to higher
Agriculture
the manufacturing sector did not change with productivity and also provides more employment
increasing degree of urbanization. The findings in major sectors of the economy. Therefore, it may
15
Log of Employment
suggest that urbanization in Kenya has increased be argued that structural transformation has had
not at the cost of productivity but has equally a positive impact on the Kenyan economy and
contributed
14 to national income by augmenting thereby increasing quality of life of the citizens.
productivity. The phenomenon is captured by data
presented in Figure 1.8.
13
Nigeria
The association between the degree of
The industrial sector, which is highly productive, urbanization and HDI in Nigeria is depicted in
12 lowest levels of employment although it is
has the the Figure 1.10 (Appendix I). The graph shows a
21.68 21.69 21.70 21.71 21.72 21.73 21.74 21.75 21.76
increasing with DU. The agricultural sector, which strong quadratic association between the degree
Figure 1.11: Degree of Urbanization, productivity and employment in Nigeria
Figure 4.1.10
17
16
15
14
13
12
11
39.074 39.075 39.076 39.077 39.078 39.079 39.080 39.081 39.082 Services
Industry
18
Agriculture
17
Log of Employment
16
15
14
13
39.074 39.075 39.076 39.077 39.078 39.079 39.080 39.081 39.082
Figure 4.1.12
12.5 13
rker
of urbanization and prosperity, which is the result The association is depicted in Figure 1.12 (Appendix
of structural change. The nature of quadratic I). Such a high value of R2 of the association
association is that the degree of urbanization suggests that they are going hand in hand. This
and HDI go hand in hand up to a certain level of scenario would be explained in terms of changes in
urbanization but HDI becomes almost inelastic productivity levels in various sectors of the country.
to urbanization beyond that. However, it has not
reached that threshold in Nigeria. The association of productivity and employment with
the degree of urbanization is presented in Figure 1.13.
Figure 1.11 shows the association between value It may be noticed from the figure that productivity
added per capita and employment with degree in agriculture has been fluctuating while it has
of urbanization in four major sectors of the increased in all other sectors with growing degree
Nigerian economy. The figure shows that levels of of urbanization. In terms of the relative position of
employment in all the sectors and the degree of the sectors from a productivity point of view, the
urbanization went hand in hand between 2005 agriculture sector is the least productive. The decline
and 2013. It may also be noticed that the relative in productivity of certain sectors is the true essence
positions from the employment point of view of structural transformation. Therefore, it may be
of various sectors remained unchanged, which argued that structural transformation witnessed by
suggests the growth of employment has been South African economy is on the right track.
similar in all sectors.
As far as the employment levels in various sectors
The association between urbanization and value are concerned, manufacturing is the only sector
added is not uniform across all the sectors. Value where employment has recorded a negative trend
added had marginally increased in agriculture and with respect to degree of urbanization. It may
manufacturing but in services sectors it surpassed be inferred that new migrant workers are being
manufacturing in 2013. On the other hand, absorbed in sectors other than manufacturing. The
value added in industry has not only declined changes in manufacturing sector such as increasing
but has a steep negative slope suggesting that productivity and decreasing employment suggest
high-value added activities are diminishing. This that the sector is consolidating in high-value
decline in value added in the industrial sector, activities. Comparatively, the productivity level in
which has the lowest level of employment share, the sector is the highest among all the sectors. This
should be a concern for the Nigerian government. step is appropriate in the direction of structural
Augmentation of productivity in all other sectors transformation.
has contributed to national income resulting in
higher HDI, captured by Figure 1.10. Therefore, it The increase in employment and productivity in
may be argued that the additional workforce in industry and services with respect to the degree of
all the sectors except industry is employed in high urbanization suggests that the additional workforce
value-added activities. Consequently, they generate is absorbed in high productive activities, resulting in
more income and lead a better quality of life with better income. Therefore, the relationship between
higher degree of urbanization. HDI and the degree of urbanization is still going
hand in hand despite achieving such a high HDI.
South Africa This is captured in Figure 1.12. It is happening
Despite having a high level of urbanization and HDI because productivity in high value-added sectors
in South Africa, the association between economic is continuously increasing. Other nations in
development and degree of urbanization is positive the continent need to follow the structural
without reaching the threshold of HDI. transformation practiced by South Africa.
14
14

13
39.074 39.075 39.076 39.077 39.078 39.079 39.080 39.081 39.082
Figure 1.13: Degree of Urbanization, productivity and employment in South Africa
Figure 4.1.12
12.5
12.0
11.5
11.0
10.5
10.0
9.5
59.54 59.55 59.56 59.57 59.58 59.59 59.60 59.61 59.62 Services
Industry
16.0
Agriculture
15.5
Log of Employment
15.0
14.5
14.0
59.54 59.55 59.56 59.57 59.58 59.59 59.60 59.61 59.62
Figure 4.1.14
Tanzania
16.0 productivity in agriculture and industry has increased
The relationship between economic development with increasing degree of urbanization while in
15.5
and urbanization in Tanzania is presented in Figure manufacturing and services, it was almost static.
1.1415.0
(Appendix I). It can be seen from the figure
that14.5
the degree of urbanization and economic As far as employment is concerned, it has recorded
development is proportionately increasing. Although positive growth in all sectors. The figure also
14.0
the best fit between the two is quadratic in nature, shows that the industrial sector despite having
there is no sign of reaching a threshold level of HDI.
13.5 the highest level of productivity, is lowest in terms
It may be inferred that the contribution of the newly- of employment. In a sense, productivity and
13.0
urbanized population is similar to that of the existing employment take the inverse position. Agriculture,
12.5
urbanized population. The phenomenon would be which provides employment to a large segment of
24.85 24.86 24.87 24.88 24.89 24.90 24.91 24.92 24.93 Services
explained in terms of the productivity growth of the population, is the least productive sector. The
various sectors of the Tanzanian economy. services sector, third in terms of productivity, is the
Industry
17 second-highest employer after agriculture.
Agriculture
The linkage between productivity and employment
with degree
16 of urbanization in Tanzanian economy is It is clear from the analysis presented in Figure
g of Employment
presented in Figure 1.15. The figure shows that the 1.15 that structural transformation in the
15
15
14
14.5
L
14.0
59.54 59.55 59.56 59.57 59.58 59.59 59.60 59.61 59.62
Figure 1.15: Degree of Urbanization, productivity and employment in Tanzania
Figure 4.1.14
16.0
15.5
15.0
14.5
14.0
13.5
13.0
12.5
24.85 24.86 24.87 24.88 24.89 24.90 24.91 24.92 24.93 Services
Industry
17
Agriculture
16
Log of Employment
15
14
13
12
24.85 24.86 24.87 24.88 24.89 24.90 24.91 24.92 24.93
Figure 4.1.15
Tanzanian
0.50 economy is leading to a higher degree Uganda
of urbanization which in turn, is contributing The association between economic development
Human Development Index
to both
0.48 productivity and employment. The and urbanization is presented in Figure 1.16.
increasing levels of productivity suggest that the
0.46
newly-urbanized population is employed in high The Figure shows that the economic development
productive activities resulting in higher national and degree of urbanization are increasing
0.44 This is captured in Figure 1.14, which
income. commensurately. However, the argument cannot
shows that the economic growth and urbanization be substantiated by empirical evidence due to
are 0.42
increasing proportionately. lack of data on productivity and employment for
the Ugandan economy. It may be inferred that
0.40 structural change in the country is proceeding in
13.0 13.5 14.0 14.5 15.0 15.5
the right direction.
Figure 4.2.2
12
e Added per worker
11
16
10
13

12
24.85 24.86 24.87 24.88 24.89 24.90 24.91 24.92 24.93
Figure 1.16: Development and Urbanization in Uganda
Figure 4.1.15
0.50
0.48
0.46
0.44
0.42
0.40
13.0 13.5 14.0 14.5 15.0 15.5
4.2 Asia Figure 4.2.2 in the graphs presented and discussed in details
12 estimates of Asian sample countries
The Tobit in respective country analyses. Irrespective of the
are presented in Table 1.2. Similar to African sign of coefficient, the parameter estimates are
economies,
11 the association of economic highly significant (at 1 per cent level). Such a high
development with degree of urbanization is positive level of significance indicates that the degree of
in all the countries except Philippines and Sri Lanka. urbanization significantly influenced the economic
10
development in Asian economies. The remainder
The coefficients of degree of urbanization in of the section discusses the degree of urbanization
both countries
9 are negative, suggesting that and its linkages with productivity growth and
economic development and urbanization are not employment in each country separately.
growing in the same direction. This is captured
8
42.52 42.53 42.54 42.55 42.56 42.57 42.58 42.59 42.60 Services
Table 1.2: Economic DevelopmentDegree
and Urbanization in Asia
of Urbanization Manufacturing
Industry
20.0 DEGREE OF URBANIZATION Agriculture
COUNTRY CONSTANT TERM LOG LIKELIHOOD/F SIGNIFICANCE LEVEL
19.5
Log of Employment
China 0.321 0.008 30.74 0.00 41.430 0.00
19.0
India -0.194 0.025 20.52 0.00 39.581 0.00
Indonesia 0.307 0.007 15.25 0.00 40.216 0.00

18.5
Malaysia 0.449 0.004 11.45 0.00 41.241 0.00
18.0
Philippines 1.168 -0.011 -12.65 0.00 44.950 0.00
Sri Lanka* 9.291 -0.467 -22.55 0.00 508.32 0.00

17.5
Thailand 42.52 42.53
0.522 42.54 42.55
0.004 42.56
11.97 42.57 42.58
0.00 42.59 38.149
42.60 0.00
Note: Dependent variable is HDI, *OLS rather than TOBIT results
Figure 4.2.4
13.0
e Added per worker
12.5
12.0
17
11.5
Log of Employm
15
14
13
China these sectors in terms of productivity remained
The association of HDI and degree of urbanization unchanged between 2005 and 2013.
12
is depicted 24.85
in Figure24.86
1.17 (Appendix
24.87
I). It
24.88
can be
24.89 24.90 24.91 24.92 24.93
seen from the figure that R2 of quadratic association As far as employment is concerned, it has increased
between the two is almost close to 1 indicating the in all the sectors except agriculture. In fact, the
Figure 4.1.15 levels of employment in services and agriculture
goodness of it. It can be seen from the figure that
HDI0.50
and urbanization are going hand in hand. sectors became almost identical in 2013. It may be
There is no sign of convergence of HDI. This kind inferred that the workforce is moving away from
of association
0.48 could be explained in terms of low value-added sectors such as agriculture, to
productivity and employment growth presented in high value-added sectors such as manufacturing
Figure
0.461.18. and industry. Unlike several African economies,
the surplus labour from agriculture is not absorbed
0.441.18 shows that productivity in all major
Figure in low value-added activities of high productive
sectors has registered a positive growth rate. sectors. Rather, the new workforce is absorbed at
0.42 productivity has grown in all the sectors,
Although high value-added jobs resulting in high degree of
manufacturing has witnessed the highest growth, industrialization which, in turn, is contributing to
0.40 by industrial with the increasing degree
followed national income and urbanization.
13.0 13.5 14.0 14.5 15.0 15.5
of urbanization. However, the relative position of
Figure 1.18: Degree of Urbanization, productivity and employment in China
Figure 4.2.2
12
11
10
8
42.52 42.53 42.54 42.55 42.56 42.57 42.58 42.59 42.60 Services
Industry
20.0
Agriculture
19.5
Log of Employment
19.0
18.5
18.0
17.5
42.52 42.53 42.54 42.55 42.56 42.57 42.58 42.59 42.60
Figure 4.2.4
13.0 18
rker
11

10
The kind
9 of structural transformation taking 2005 it was 29.24 and 42.52 per cent in India and
place in the Chinese economy is meeting the China respectively. But it changed to 31.99 and
main purpose of it. As defined earlier, structural 53.17 per cent respectively. In 2013, the association
8
transformation
42.52
should result42.54
42.53
in greater economic
42.55 42.56
between
42.57 42.58
the degree
42.59
of42.60
urbanization and economic
Services
growth by replacing low-productive sectors with development could be explained in terms of
high-productive ones. In China, even productivity in productivity and employment growth presented in
Industry
the 20.0
least-productive sector has registered a positive Figure 1.20.
Agriculture
growth although the employment in the sector
has 19.5
declined suggesting that agriculture has been Figure 1.20 shows that, as with China, the
Log of Employment
capital intensive and a lot of technology transfer productivity in all the sectors has registered a
has 19.0
taken place in the sector. positive growth as the degree of urbanization
increased. In India, it is the services sector that
India
18.5 has registered the highest productivity growth
Figure 1.19 (Appendix I) presents an association followed by manufacturing. The change in
18.0 economic development and the degree
between productivity in the industrial sector has been the
of urbanization in India. It can be seen from the lowest. In terms of relative position, the services
17.5
figure that the trend is similar to that of China but sector occupied the first position, surpassing
42.52 42.53 42.54 42.55 42.56 42.57 42.58 42.59 42.60
the level of urbanization is much lower in India. In industry which had been the most productive in
Figure 1.20: Degree of Urbanization, productivity and employment in India
Figure 4.2.4
13.0
12.5
12.0
11.5
11.0
10.5
10.0
29.24 29.25 29.26 29.27 29.28 29.29 29.30 29.31 29.32 Services
Industry
19.5
Agriculture
19.0
Log of Employment
18.5
18.0
17.5
17.0
29.24 29.25 29.26 29.27 29.28 29.29 29.30 29.31 29.32
Figure 4.2.6
19 19
rker
2005. The productivity levels in manufacturing and Although the relative position of productivity of the
industry were similar in 2013. main sectors remained unchanged with increasing
degree of urbanization during 2005 to 2013, the
As far as growth of employment in these sectors is industrial sector has witnessed a negative trend.
concerned, it has increased except in agriculture, The productivity of the sector has declined with
a trend similar to that of China. It may be inferred the increase in urbanization. The productivity in
that India is going the same way as China with other sectors almost remained static during 2005
respect to structural change and degree of to 2013, while the degree of urbanization changed
urbanization but the levels of urbanization is very from 45.94 to 52.25 per cent.
different. The degree of urbanization in 2013
in China and India is 53.17 and 31.99 per cent Looking at the growth of employment in these
respectively. However, the relative position of sectors, one may notice that it is agriculture
the sectors in terms of productivity in both the where employment has declined while in other
countries is not identical. In China services sector is sectors it has increased marginally. The increase
on the third position in terms of productivity while in employment and decrease in productivity in
in India the sector occupies the first position. the industrial sector suggests that the surplus
manpower from agriculture is being absorbed in
It may be concluded that the service sector is given industry at low productive activities resulting in
more importance than manufacturing and industry low national income but this is being compensated
while in China the preference is the other way by increase in productivity and employment in the
round. Another distinguishing aspect between services sector.
the two countries is the change of the degree of
urbanization during 2005 to 2013. It changed Despite the slow growth in employment and
dramatically from 42.52 to 53.17 per cent in China productivity in the economy, the urban population
while in India it increased from 29.24 to just 31.99 changed from 45.94 to 52.25 per cent during 2005
per cent. to 2013.This is somewhat different from India.
The change in the urban population is much less
Indonesia in India while it was very large in China during the
The linkage between the economic development same period.
and degree of urbanization in Indonesia is depicted
in Figure 1.21 (Appendix I). The scenario is similar to The change in the degree of urbanization and
that of China and India not only in terms of trend HDI are not commensurate. This is because the
but also with respect to threshold level. The curve productivity in some sectors has increased while
does not show any sign of HDI being inelastic to the in others it has decreased, resulting in very little
degree of urbanization. The levels of productivity contribution to national income. Consequently,
and employment presented in Figure 1.22 explain the change in HDI is marginal (from 0.64 in 2005
the association between economic development to 0.68 in 2013). It may be inferred that additional
and urbanization. workforce could not contribute proportionately
to economic development. Therefore, the large
change in degree of urbanization contributed little to
change in HDI and this is captured in Figure 1.21.
20
17.5

17.0
29.24 29.25 29.26 29.27 29.28 29.29 29.30 29.31 29.32
Figure 1.22: Degree of Urbanization, productivity and employment in Indonesia
Figure 4.2.6
19
18
17
16
15
45.94 45.95 45.96 45.97 45.98 45.99 45.100 45.101 45.102 Services
Industry
18
Agriculture
Log of Employment
17
16
15
45.94 45.95 45.96 45.97 45.98 45.99 45.100 45.101 45.102
Malaysia On the other hand, the levels of employment have

Figure 4.2.8
11.751.23 (Appendix I) depicts the relationship
Figure increased in all the sectors except agriculture. The
between HDI and the degree of urbanization in employment scenario in Malaysia is different from
11.50
Malaysia. Like other Asian countries, the association most of the countries featured in this paper. The
is positive
11.25 with a very high value of R . Although
2
agriculture sector has been found to be the largest
the levels of urban population and HDI are much employer in other countries while it takes the
11.00in Malaysia than even in China, there is no
higher third position in Malaysia followed by services and
sign of HDI being inelastic to urban population. The manufacturing. Such a large volume of employment
10.75
productivity and employment growth depicted in in the services and manufacturing sectors with
Figure
10.501.24 would reveal the reason behind it. increasing productivity might have resulted in
income and consequently high HDI compared to
10.25
The scenario with regard to productivity growth is other countries. The employment in industrial sector
66.59 66.60 66.61 66.62 66.63 66.64 66.65 66.66 66.67 Services
similar to that of Indonesia. Productivity in all sectors which was the lowest in 2005 reached similar levels
except industry has increased with the growing urban as that of agriculture in 2013.
Industry
population
16.0 while, in industry, it has drastically declined
Agriculture
and led to a change in its relative position from top to The figure shows that workforce is moving away
second
15.5after manufacturing in 2013. The productivity from agriculture and is being absorbed in all the
g of Employment
in other sectors has grown at almost the same rate. sectors - highest in services, which is the second-
15.0
21
14.5
15
45.94 45.95 45.96 45.97 45.98 45.99 45.100 45.101 45.102
Figure 1.24: Degree of Urbanization, productivity and employment in Malaysia
Figure 4.2.8
11.75
11.50
11.25
11.00
10.75
10.50
10.25
66.59 66.60 66.61 66.62 66.63 66.64 66.65 66.66 66.67 Services
Industry
16.0
Agriculture
15.5
Log of Employment
15.0
14.5
14.0
13.5
66.59 66.60 66.61 66.62 66.63 66.64 66.65 66.66 66.67
least productive sector. Since the newly-migrated

Figure 4.2.9 presence of establishments and facilities for basic
13.5
workforce is absorbed in a higher productive sector, services.21
it augments overall productivity gains resulting in

13.0
higher national income and, consequently, higher The new definition is that a barangay is considered
HDI.12.5
It may be argued that structural change is urban if it has a population size of 5,000 or more;
leading to higher degree of urbanization and better at least one establishment with a minimum of 100
12.0
quality of life for Malaysia’s citizens. employees or if has five or more establishments
with a minimum of ten employees, and ten or more
11.5
Philippines facilities within the two-kilometre radius from the
It may
11.0not be appropriate to relate the degree barangay hall.22
of urbanization with economic development in
the 10.5
Philippines as the definition of urbanization The new definition may lead to de-urbanization due
46.60 46.61 46.62 46.63 46.64 46.65 46.66 46.67 46.68 Services
radically changed in 2003. Until 2003 the to movement of establishments to more than two
Philippines classified urban and rural areas using kilometres away from a barangay hall. And if the
Industry
the 17.0
physical and economic characteristics of population of such barangay is fewer than 5,000,
Agriculture
barangays. The definition of urban areas which
21 National Statistical Coordination Board, Resolution no. 9, 2003
has16.5
been in use since the 1970 census, considers 22 From http://www.nscb.gov.ph/pressreleases/2004/30Jan04_
g of Employment
population density, street patterns and the urban.asp, accessed on December 10, 2015
16.0
15.5
22
15.0
14.0

13.5
66.59 66.60 66.61 66.62 66.63 66.64 66.65 66.66 66.67
Figure 1.25: Degree of Urbanization, productivity and employment in Philippines
Figure 4.2.9
13.5
13.0
12.5
12.0
11.5
11.0
10.5
46.60 46.61 46.62 46.63 46.64 46.65 46.66 46.67 46.68 Services
Industry
17.0
Agriculture
16.5
Log of Employment
16.0
15.5
15.0
14.5
14.0
46.60 46.61 46.62 46.63 46.64 46.65 46.66 46.67 46.68
it would become rural, resulting in a decline of 4.2.10

Figure only experienced the highest employment growth
the 10.0
degree of urbanization. As a result, the urban but also is the largest employer in the economy.
population
9.5 declined from 46.60 per cent in 2005 An increased level of productivity is expected to
to 44.63
9.0 per cent in 2013. However, HDI increased contribute to a higher national income and this is
from 0.64 to 0.66 during the same period. On the what has happened in Philippines. Consequently,
8.5
other hand the productivity and employment in HDI has increased during 2005 to 2013.
most8.0
of the sectors has grown during 2005 and
20137.5
which is depicted in Figure 1.25. Sri Lanka
7.0 As the definition of urbanization is not static,
The case of Philippines is unique. The productivity it is not appropriate to relate it to the degree
6.5
in all the sectors has registered a positive growth of economic development in Sri Lanka. It is not
6.0
during 2005 to 2013 but the percentage of urban based18.44
on any 18.45
definite 18.46
criterion such as the size of
18.38 18.39 18.40 18.41 18.42 18.43 Services
population has declined. This is could be due to a population, population density, proportion of the
Degree of Urbanization Industry
change in the definition of urbanization. As far as male population in non-agricultural occupations or
Agriculture
employment
20.25 is concerned, it has also experienced status of civil administration.23
a positive growth rate except in manufacturing
sector which has been almost stagnant. The
g of Employment
20.00
services sector, the third-most productive one, not 23 Panditharathne, 1996
19.75
23
14.5
14.0
46.60 46.61 46.62 46.63 46.64 46.65 46.66 46.67 46.68
Figure 1.26: Degree of Urbanization, productivity and employment in Sri Lanka
Figure 4.2.10
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
6.0
18.38 18.39 18.40 18.41 18.42 18.43 18.44 18.45 18.46 Services
Agriculture
20.25
Log of Employment
20.00
19.75
19.50
19.25
18.38 18.39 18.40 18.41 18.42 18.43 18.44 18.45 18.46
Consequently, the degree of urbanization Figure

has 4.2.12 It can be seen from the figure that productivity
14
decreased from 18.38 in 2005 to 18.30 per cent has registered a positive growth in all sectors of
in 2013. The major reasons responsible for the the economy from 2005 to 2013. The highest
decreasing
13 trend of level of urbanization are the growth has been achieved by industry followed
absence of an acceptable definition of urban by services and agriculture. On the other hand,
settlements and an island-wide census in 2001.24 In the employment scenario depicts a grim situation.
12
Sri Lanka, urban status is conferred on an area by Employment in services has almost been static
the Minister in charge of Local Government purely and in industry it has drastically declined. It is the
for local
11 administrative purposes. 25
However, agriculture sector where employment has grown.
the country has experienced positive growth
of economic development and that would be The reason for productivity growth could be due to
10
explained in terms 37.53
37.52 productivity
37.54 and 37.55
employment
37.56 37.57intra-sectoral
37.58 changes37.60
37.59 such as technology transfer
Services
growth presented in Figure 1.26. and optimum allocation of resources. It is worth
mentioning that the garments manufacturing
Industry
17.0 sector in Sri Lanka has performed well in national
Agriculture
and international markets in recent years. From a
16.5
24 Uduporuwa, 2010
productivity perspective, the structural change in Sri
g of Employment
25 ibid
16.0 Lanka is in the right direction but the phenomenon
15.5
24
15.0
9.0

8.0
7.5
of de-urbanization
7.0 cannot be explained with the with increasing urbanization, while it has increased
help of data. in other sectors though the change in the services
6.5
sector has been marginal. Consequently, the
6.0
Thailand 18.38 18.39 18.40 18.41 18.42 18.43productivity 18.44
levels
18.45
of the industrial and services
18.46 Services
Figure 1.27 (Appendix I) presents the linkages sectors became almost identical in 2013 while the
between economic development and urbanization. manufacturing sector maintained its top position.
Agriculture
The nature of association is similar to many of the
20.25 Like many other countries the agriculture sector has
sample economies but the figure shows that HDI been the least productive.
became inelastic after reaching a threshold level of
Log of Employment
20.00
0.72. The HDI did not change after that but urban Employment in agriculture has declined with
population grew from 37.52 to 47.94 per cent in increasing degree of urbanization whereas it has
2013. The productivity and employment growth
19.75 increased in other sectors. The relative position of
presented in Figure 1.28 would explain the nature sectors in terms of levels of employment did not
of association between HDI and the degree of change with increasing degree of urbanization. It
19.50
urbanization. can be seen from the Figure that productivity has
been increasing with the degree of urbanization.
19.25
It can be seen from the figure that the growth of The Figure also shows that productivity growth in
18.38 18.39 18.40 18.41 18.42 18.43 18.44 18.45 18.46
productivity in the industrial sector has declined agriculture, manufacturing and services is marginal
Figure 1.28: Degree of urbanization, productivity and employment in Thailand
Figure 4.2.12
14
13
12
11
10
37.52 37.53 37.54 37.55 37.56 37.57 37.58 37.59 37.60 Services
Industry
17.0
Agriculture
16.5
Log of Employment
16.0
15.5
15.0
14.5
14.0
37.52 37.53 37.54 37.55 37.56 37.57 37.58 37.59 37.60
Figure 4.3.2
11.5 25
rker
and this might have resulted in near stagnation of Argentina

national income. Therefore, the stagnation of HDI Figure 1.29 (Appendix I) depicts the association
may be attributed to the decline in productivity in between HDI and degree of urbanization in
the industrial sector and the marginal increase in Argentina. This is similar to many other countries
productivity in other sectors. The findings suggest but differs in reaching the threshold level of HDI. It
that the contribution of degree of urbanization to can be seen from the Figure that the HDI reached a
economic development is marginal, particularly threshold level of 0.804 at 91.13 per cent degree of
after a threshold level of urbanization. urbanization in 2011. Thereafter, the rate of change
of HDI with respect to the degree of urbanization
Latin America is almost stagnant, suggesting that urbanization
Tobit26 estimates of the coefficient of degree of beyond the threshold level is disproportionately
urbanization in sample Latin American countries contributing to national income. The productivity
are presented in Table 1.3. The results are similar and employment growth presented in Figure 1.30
to other countries. The Table also shows that may be useful in establishing the linkages between
no country in Latin America has witnessed urbanization and economic development.
de-urbanization. The parameter estimates are
significant at the highest level (1 per cent). Such a It can be seen from the Figure that productivity
high level of statistical significance suggests that the in the industrial sector has declined with the
association between economic development and increase in urban population while the other
degree of urbanization is positive and very strong. sectors have realised an increase in productivity. The
manufacturing sector maintained its top position
The remainder of the section presents country during 2005 to 2013 while the agriculture sector
specific association and its interpretation in terms of occupies second position, shifting industry to third.
productivity and employment growth. Strangely, the services sector in Argentina is found
to be the least productive, a situation different from
most of the sample countries of Asia and Africa.
As far as the employment scenario is concerned,

the services sector (which is least productive)
26 The regression model did not converge in TOBIT in many
countries. Hence base results are presented in the table and
provides jobs to the largest number of people. In
such countries are marked with * other countries, this is usually applicable to the
Table 1.3: Development and Urbanization in Latin America
DEGREE OF URBANIZATION
COUNTRY CONSTANT TERM LOG LIKELIHOOD/F SIGNIFICANCE LEVEL
Argentina* -1.799 0.028 7.61 0.00 57.92 0.00
Bolivia 0.112 0.008 14.91 0.00 44.407 0.00
Brazil* -0.673 0.017 15.78 0.00 248.90 0.00
Colombia -0.448 0.015 14.89 0.00 42.450 0.00
Mexico* -0.391 0.015 25.29 0.00 639.38 0.00
Venezuela* -8.455 0.104 9.38 0.00 87.96 0.00
Note: Dependent variable is HDI; *Base results rather than Tobit results
26
14.5
14.0
37.52 37.53 37.54 37.55 37.56 37.57 37.58 37.59 37.60
Figure 1.30: Degree of urbanization, productivity and employment in Argentina
Figure 4.3.2
11.5
11.0
10.5
10.0
9.5
90.08 90.09 90.10 90.11 90.12 90.13 90.14 90.15 90.16 Services
Industry
16.5
Agriculture
16.0
Log of Employment
15.5
15.0
14.5
14.0
13.5
90.08 90.09 90.10 90.11 90.12 90.13 90.14 90.15 90.16
agriculture sector. This sector in ArgentinaFigure

on the4.3.4 the sector. Therefore, the sector also contributes to
other10.75
hand, provides employment which is lower the stagnation of HDI.
than10.50
all the sectors, a phenomenon rarely seen in
other countries. The growth analysis of employment Bolivia
10.25that it has been stagnant in the
suggests Presented in Figure 1.31 (Appendix I), the
agriculture
10.00 sector with increasing degrees of urban association between economic development
population while in industry and manufacturing and degree of urbanization in Bolivia shows that
9.75
it has marginally increased and the services sector degree of urbanization and HDI is increasing
9.50
experienced a reasonable growth. proportionately. Another noticeable fact is that the
9.25
urban population has not reached any threshold
The Argentinian economy may be regarded as a level. This form of association is explained in
9.00
services sector oriented one. The sector being least terms of the productivity and employment growth
64.19 64.20 64.21 64.22 64.23 64.24 64.25 64.26 64.27 Services
productive does not contribute much to national depicted in Figure 1.32.
income resulting in an almost stagnant HDI. The
Industry
industrial
15.5 sector, whose productivity is declining It can be seen from the Figure that it is only the
Agriculture
with increasing employment and urbanization, services sector that has experienced decline in
15.0that the additional workforce from rural
suggests productivity. In industrial and manufacturing sectors
g of Employment
areas is absorbed in low value-added activities in it has marginally increased. The highest growth has
14.5
14.0
27
13.5
14.0
13.5
90.08 90.09 90.10 90.11 90.12 90.13 90.14 90.15 90.16
Figure 1.32: Degree of urbanization, productivity and employment in Bolivia
Figure 4.3.4
10.75
10.50
10.25
10.00
9.75
9.50
9.25
9.00
64.19 64.20 64.21 64.22 64.23 64.24 64.25 64.26 64.27 Services
Industry
15.5
Agriculture
15.0
Log of Employment
14.5
14.0
13.5
13.0
12.5
64.19 64.20 64.21 64.22 64.23 64.24 64.25 64.26 64.27
been realised by the agriculture sector. The relative

Figure 4.3.6 sectors. This form of structural change contributes
10.5 of the sectors did not change with the
position positively to urbanization and can offer better
increasing degree of urbanization during 2005 to quality of life to the citizens.

2013. The growth of employment scenario would
10.0
suggest that the level of employment has decreased Brazil
in agriculture and that the workforce has moved The association between economic development
9.5 the sector. Largely, it has been absorbed
out from and degree of urbanization in Brazil presented in
in the services sector which has registered the Figure 1.33 (Appendix I) is somewhat different
highest
9.0 employment growth. Employment industry from Bolivia’s. The degree of urbanization reached
and manufacturing has marginally grown with a threshold level of HDI 0.739 at the urban
the increasing degree of urbanization. It may be population density at 84.34 per cent in 2011.
8.5
inferred that new migrants
82.83 82.84
from
82.85
rural areas are
82.86 82.87
Thereafter,
82.88 82.89
the urban 82.91
82.90
population has increased to
Services
being absorbed in the highly-productive industrial 85.17 per cent in 2013 with very little change in
sector, thereby contributing reasonably to national HDI at the level of 0.744. In general, the degree of
Industry
income.
18.5 Consequently, the HDI has increased with urbanization is much higher in Brazil than in many
Agriculture
the increasing degrees of urbanization. Therefore, other countries. This may be one of the reasons for
18.0
it may be argued that structural change witnessed HDI being inelastic to additional urban population.
g of Employment
in Bolivia
17.5
is based on productivity gains in all the An effort would be made to explain this type of
17.0
28
16.5
10.25

10.00
9.75
9.50
association between the two by the productivity decrease in employment. The highest employment
and9.25
employment growth presented in Figure 1.34. growth has been realized in industrial sector. It
is clear from the analysis that employment in the
9.00
It can be seen from the figure that productivity industrial sector is increasing and productivity is
64.19 64.20 64.21 64.22 64.23 64.24 64.25 64.26 64.27 Services
of all the sectors except industry has registered decreasing with population increases. At the same
a positive growth. In fact, the manufacturing time, employment in agriculture is also declining.
Industry
sector
15.5was the second-most productive in 2005
Agriculture
surpassed industrial sector to become most It may be inferred that the workforce is migrating
15.0
productive in 2013. During this period urban from rural to urban areas, leading to a higher
Log of Employment
population
14.5
changed from 82.83 to 85.17 per cent. degree of urbanization but such migrants are
Although there has been growth of productivity absorbed in low-value jobs in the industrial sector
in services
14.0 and agriculture, their relative position thereby increasing employment. Consequently,
did not change with increasing degree of the productivity of the sector has declined as
13.5
urbanization. The agriculture sector remained the urban population increased. The net result is very
least13.0
productive in 2013 as well. limited contribution in national income due to the
newly-urbanized population. This is captured by
The12.5
growth analysis of employment suggests that Figure 1.33 where HDI has become stagnant with
64.19 64.20 64.21 64.22 64.23 64.24 64.25 64.26 64.27
it is the agriculture sector that has witnessed a increasing urban population. This kind of structural
Figure 1.34: Degree of urbanization, productivity and employment in Brazil
Figure 4.3.6
10.5
10.0
9.5
9.0
8.5
82.83 82.84 82.85 82.86 82.87 82.88 82.89 82.90 82.91 Services
Industry
18.5
Agriculture
18.0
Log of Employment
17.5
17.0
16.5
16.0
15.5
82.83 82.84 82.85 82.86 82.87 82.88 82.89 82.90 82.91
Figure 4.3.8
18.0 29
rker
10.0

9.5
transformation
9.0 may be regarded as economic It can be seen from the figure that productivity
growth-less employment creation. levels in all the sectors remained stagnant with
the increasing degree of urban population. The
8.5
Colombia 82.83 82.84 82.85 82.86 82.87 82.88 urban population changed from 73.58 to 75.88 per
82.89 82.90 82.91 Services
As shown in Figure 1.35, the association between cent during 2005 to 2013 but productivity gain is
the economic development and the degree of almost negligible in all the sectors. Consequently,
Industry
urbanization
18.5 in Colombia is similar to that of Brazil. the relative positions of the sectors in terms of
Agriculture
The urban population reached the threshold level productivity did not experience much change.
of HDI18.0
level of 0.710 with 75.32 per cent urban
Log of Employment
population in 2011. Although the urban population As far as sectoral employment growth is concerned,
17.5
changed to 75.88 per cent in 2013, HDI remained the relative positions of the sectors have not
at an 17.0
almost identical level of 0.711. HDI declined changed with increasing degree of urbanization
to 0.708 in 2012 but recovered in the next year. but growth of employment varies among sectors.
16.5
The Colombian economy might have gone through For instance, the employment in agriculture has
the same
16.0 form of structural transformation, declined while the services sector has registered the
presented in Figure 1.36, as Brazil. highest employment growth followed by industry
15.5 and manufacturing. In Colombia, the workforce
82.83 82.84 82.85 82.86 82.87 82.88 82.89 82.90 82.91
is moving from agriculture, where production is
Figure 1.36: Degree of urbanization, productivity and employment in Colombia
Figure 4.3.8
18.0
17.5
17.0
16.5
16.0
15.5
73.58 73.59 73.60 73.61 73.62 73.63 73.64 73.65 73.66 Services
Industry
17.0
Agriculture
16.5
Log of Employment
16.0
15.5
15.0
14.5
14.0
73.58 73.59 73.60 73.61 73.62 73.63 73.64 73.65 73.66
Figure 4.3.10
13.0 30
rker
17.5

16.5
relatively low, to the high-productive services sector. Mexico
But 16.0
the new migrants are absorbed in low value- Depicted in Figure 1.37 (Appendix I), it can be
added activities in other sectors resulting in almost noticed that, like many other countries in Latin
15.5
stagnant productivity
73.58
of the73.60
73.59
sectors. 73.61
Since the
73.62
America,
73.63 73.64
HDI 73.65
reached 73.66
the threshold level of 0.752
Services
additional workforce from agriculture is provided at an urbanization level of 78.12 per cent in
low value-added jobs, their contribution to national 2011. Since then, the rate of change of HDI has
Industry
income
17.0 is marginal. This leads to stagnant HDI been declining as the urban population has been
Agriculture
which is captured in Figure 1.35. increasing. The urban population changed to 0.52
16.5 percentage points while HDI changed from 0.752
Log of Employment
Like16.0
Brazil, this type of urbanization is not in 2011 to 0.756 in 2013. The productivity and
commensurately contributing to HDI. The newly- employment growth of the Mexican economy
urbanized
15.5 population may not be getting the presented in Figure 1.38 would explain the
true benefit of urban areas. Rather, this type of inelasticity of HDI with the degree of urbanization.
15.0
urbanization may contribute to slum formation.
The14.5
migrant population cannot be blamed for this It can be seen from Figure 1.38 that productivity
because they move from rural to urban areas as in manufacturing and industrial sectors declined
they14.0
have no employment opportunities there. during 2005 to 2013 with increasing degrees of
73.58 73.59 73.60 73.61 73.62 73.63 73.64 73.65 73.66
urbanization while in agriculture and services it
Figure 1.38: Degree of urbanization, productivity and employment in Mexico
Figure 4.3.10
13.0
12.5
12.0
11.5
11.0
10.5
76.31 76.32 76.33 76.34 76.35 76.36 76.37 76.38 76.39 Services
Industry
17.5
Agriculture
17.0
Log of Employment
16.5
16.0
15.5
15.0
76.31 76.32 76.33 76.34 76.35 76.36 76.37 76.38 76.39
Figure 4.3.12
12.0 31
rker
almost remained stagnant during the same period. the country has achieved a very high degree of
Although the productivity of highly productive urbanization, just lower than that of Argentina.
sectors such as industry and manufacturing Consequently, HDI has been high. However, in
declined, the relative position of all the sectors 2009, HDI decreased from the previous year
remained unchanged. The agriculture sector and has been almost stagnant since then.
remained the least-productive sector. The association between HDI and degree of
urbanization would be explained from the
The analysis of employment in various sectors productivity and employment growth presented in
suggests that a positive growth was registered in all. Figure 1.40.
The services sector recorded the highest employment
growth while agriculture has been the lowest. The It can be seen from the figure that productivity of
employment growth analysis suggests that there the industrial and manufacturing sectors declined
has been very little movement of workforce from with the increasing degree of urbanization,
agriculture to other sectors. The migrant population while it recorded a positive growth on the other
might have been absorbed in low value-added two sectors. Despite the changes in productivity
activities of manufacturing and industrial sectors growth, the relative position of sectors in terms of
resulting in the decline in overall productivity. productivity remained unchanged during 2005 to
2013. At the same time, the percentage of urban
Although the services sector in Mexico provides population marginally changed from 88.56 to
employment to the largest percentage of 88.89 per cent.
workforce, it stands third from a productivity
perspective. Moreover, the productivity of the sector The analysis of sectoral employment growth
has been stagnant as urbanisation has increased. suggests that it has increased in all the sectors,
It can be inferred from the analysis that the migrant with the highest growth in industry followed
population has been absorbed in low value-added by services and manufacturing. The agriculture
economic activities in urban areas. Consequently, sector recorded the lowest employment growth.
their contribution to the national income has been The findings suggest that the industrial sector
much less compared to existing urban population, registered the highest employment growth even
thereby resulting in almost no change in HDI though the productivity of the sector has declined
which is captured in Figure 1.37. The findings with the increasing degree of urbanization.
also suggest that degree of urbanization has not
increased compared to the sample countries of A similar trend is being followed by the
Asia and Africa. It can be inferred that the country manufacturing sector. The declining productivity and
has reached a saturation level from urbanization increasing employment suggests that the additional
perspective resulting in less economic development. workforce is absorbed in low value-added activities
of the highly-productive sectors, resulting in a
Venezuela disproportionate contribution to national income.
Figure 1.39 (Appendix I) depicts the relationship Consequently, the HDI hardly changed during 2005
between economic development and degree of to 2013. It may also be noted that Venezuela has
urbanization in Venezuela. The scenario is very achieved a high degree of urbanization and the
different from other countries in the region and rate of change of urban population is low. It may be
elsewhere. The HDI in Venezuela reached to a inferred that urbanization has reached a saturation
threshold level of 0.758 in 2008 at 88.69 per level and additional degree contributes very little to
cent of urbanization level. It can be seen that national income.
32
15.5

15.0
76.31 76.32 76.33 76.34 76.35 76.36 76.37 76.38 76.39
Figure 1.40: Degree of urbanization, productivity and employment in Venezuela
Figure 4.3.12
12.0
11.5
11.0
10.5
10.0
9.5
9.0
88.56 88.57 88.58 88.59 88.60 88.61 88.62 88.63 88.64
Services
Industry
16.5
Agriculture
16.0
Log of Employment
15.5
15.0
14.5
14.0
13.5
88.56 88.57 88.58 88.59 88.60 88.61 88.62 88.63 88.64
Figure 4.1.1
0.70
Summary In Africa, Botswana and Ethiopia reached to a
The0.68
analysis of the linkages between degree of threshold level of HDI where the index becomes
urbanization and economic development presented inelastic to the growth of urban population.
0.66
in the paper suggests that there are huge variations The stagnation of HDI with a high degree of
among continents although the association urbanization is understandable but it seems
0.64
is positive in all the countries analysed except unimaginable in countries such as Ethiopia. The
Philippines and Sri Lanka. HDI became inelastic to growth of urbanization at
0.62 the level of 17.74 per cent of urban population.
The degree of urbanization also varies substantially The decline in productivity in high productive
0.60
from one continent to another. In Africa, it varies sectors such as industrial and manufacturing has
55.0 55.2 55.4 55.6 55.8 56.0 56.2 56.4 56.6 56.8 57.0
from 18.59 per cent in Ethiopia to 63.79 per cent been the major reasons for the slow urbanization
in South Africa in 2013 while in Asia it varies from process and stagnation of economic development.
Figure 4.1.3
18.30 in Sri Lanka to 73.28 per cent in Malaysia. The In other African countries, the degree of
0.45
percentage of urban population is much higher in urbanization and economic development as
Latin America, where it varied from 67.70 per cent in a result of structural transformation has been
Development Index
Bolivia to 91.45 per cent in Argentina in 2013. increasing proportionately.

0.40
33
The analysis of Asian countries suggests that urbanization has been achieved by all the sample
Thailand is the only exception, where HDI reached countries. In 2013, it varied from 67.70 per
to a threshold level of 0.72 and became inelastic cent in Bolivia to 91.45 per cent in Argentina.
to the degree of urbanization at the level of 44.08 Consequently, HDI reached a threshold level at
percent of urban population. The decline in the some point during 2005 to 2013 in all the countries
productivity of the industrial sector may be due to except Bolivia. The proportionate increase in HDI
this phenomenon. Although the urban population and urban population is understandable as the
grew from 44.08 per cent in 2008 to 47.94 per degree of urbanization is low. There exists the
cent in 2013, the HDI remained stagnant at the possibility of a greater degree of urbanization that
level of 0.72. In other Asian countries though the is expected to result in better income and improved
degree of urbanization varies drastically from one quality of life of the Bolivian people. On the other
country to another, there is no sign of stagnation hand, in the rest of the Latin American countries,
of HDI. For instance, the degree of urbanization HDI became inelastic to urban population as they
in 2013 in China and India was 53.17 and 31.99 have reached a saturation level in terms of urban
respectively while in Malaysia it was 73.28 per population. Additional urban population neither
cent. Philippines and Sri Lanka have experienced contributes to productivity nor are cities equipped
declines in their urban population during 2005 to to accommodate more population.
2013. It may be attributed to the terrain of the
country in the case of Philippines while frequent Therefore, it may be inferred that lots of structural
changes in definition of urbanization may be the change is taking place in Asia and Africa resulting
main cause in Sri Lanka. In general, the association in higher incomes and better quality of life but in
between economic development and degree of Latin America there is very little scope for further
urbanization has been positive and significant. increases in the degree of urbanization. Cutting
across the region, the association between the
The behaviour of Latin American countries is degree of urbanization and economic development
very different from the countries of the other is found to be positive and significant.
two continents. In general, a high degree of
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35
15.0
of Eo
of Emplo
14.5
Log
15.0
14.0
LogLog
14.5
14.0
13.5
14.0 88.56 88.57 88.58 88.59 88.60 88.61 88.62 88.63 88.64
13.5
Appendix I
88.56 88.57 88.58 Degree
88.59 of Urbanization
88.60 88.61 88.62 88.63 88.64
13.5
Figure 1.2:88.56
Development
88.57 and Urbanization
88.58 88.59 ofin
Degree Botswana
88.60 88.61
Urbanization 88.62 88.63 88.64
Figure 4.1.1
0.70 Figure 4.1.1
0.70 Figure 4.1.1
Index
0.68
0.70
Index
0.68
Development
Index
0.66
0.68
Development
0.66
Development
0.64
0.66
0.64
Human
0.62
0.64
Human
0.62
Human
0.60
0.62
55.0 55.2 55.4 55.6 55.8 56.0 56.2 56.4 56.6 56.8 57.0
0.60
55.0 55.2 55.4 55.6 Degree
55.8 of56.0
Urbanization
56.2 56.4 56.6 56.8 57.0
0.60
55.0 55.2 55.4 55.6 55.8 of56.0
Degree 56.2
Urbanization 56.4 56.6 56.8 57.0
Figure 1.4: Development and Urbanization in Ethiopia Figure 4.1.3
0.45 Degree of Urbanization
Figure 4.1.3
0.45 Figure 4.1.3
Index
0.45
Index
Development
0.40
Index
Development
0.40
Development
0.40
0.35
Human
0.35
Human
0.35
Human
0.30
15.5 16.0 16.5 17.0 17.5 18.0 18.5 19.0
0.30
15.5 16.0 16.5 Degree
17.0of Urbanization
17.5 18.0 18.5 19.0
0.30
15.5 16.0 16.5 17.0of Urbanization
Degree 17.5 18.0 18.5 19.0
Figure 4.1.5
Figure
Figure 1.6: Development and Urbanization 4.1.5
in Ghana
0.58 Figure 4.1.5
Index
0.58
0.56
Index
Development
0.56
Index
Development
0.56
0.54
Development
0.54
0.54
Human
0.52
Human
0.52
Human
0.52
0.50
47 48 49 50 51 52 53
0.50
47 48 49 Degree of 50
Urbanization 51 52 53
0.50
47 48 49 Degree of 50
Figure 4.1.7
Figure 4.1.7
0.54
0.53 Figure 4.1.7
Index
0.54 36
0.53
Index
0.52
ment
0.53
t ex
0.52
0.54
De
Devel
Develop
0.54
Human
Human
0.52
Human 0.52
0.50
0.5047 48 49 50 51 52 53
47 48 49 Degree of 50
0.50
Figure 1.8:
47 Development
48 and Urbanization
49 Degree ofin50
Kenya
Figure
Degree 4.1.7
of Urbanization
0.54 Figure 4.1.7
0.54 Figure 4.1.7
0.53
Index
0.54
0.53
Index
0.52
Development
0.53
Index
0.52
Development
0.51
0.52
Development
0.51
0.50
0.51
0.50
0.49
Human
0.50
0.49
Human
0.48
0.49
Human
0.48
0.47
0.4821.5 22.0 22.5 23.0 23.5 24.0 24.5 25.0
0.47
Degree 23.5 24.0 24.5 25.0
0.47
21.5 22.0 22.5 23.0 23.5
Degree of Urbanization 24.0 24.5 25.0
Figure
Figure 1.10: Development and Urbanization
Degree in 4.1.9
Nigeria
of Urbanization
0.51 Figure 4.1.9
0.51 Figure 4.1.9
Index
0.51
0.50
Index
0.50
Development
Index
0.50
0.49
Development
0.49
Development
0.49
0.48
0.48
Human
0.48
0.47
Human
0.47
Human
0.47
0.46
0.4638 39 40 41 42 43 44 45 46 47
38 39 40 41 Degree42of Urbanization
43 44 45 46 47
0.46
38 39 40 41 Degree42of Urbanization
43 44 45 46 47
Figure
Degree 4.1.11
of Urbanization
0.671.12: Development and Urbanization
Figure Figurein4.1.11
South Africa
0.67 Figure 4.1.11
0.66
Index
0.67
0.66
Index
0.65
Development
0.66
Index
0.65
Development
0.64
0.65
Development
0.64
0.63
0.64
0.63
0.62
Human
0.63
0.62
Human
0.61
0.62
Human
0.61
0.60
0.61
0.6059.0 59.5 60.0 60.5 61.0 61.5 62.0 62.5 63.0 63.5 64.0
59.0 59.5 60.0 60.5 61.0 of61.5
Degree 62.0
Urbanization 62.5 63.0 63.5 64.0
0.60
59.0 59.5 60.0 60.5 61.0 of61.5
Degree 62.0
Urbanization 62.5 63.0 63.5 64.0
Figure
Degree 4.1.13
of Urbanization
0.50 Figure 4.1.13
0.50
0.49 Figure 4.1.13
Index
0.50
0.49
0.48 37
Index
0.49
0.48
tent
0.47
ex
0.63
0.64
De
Devel
0.63
Develop
0.62
Human
0.62
Human
0.61
0.62
Human 0.61
0.60
0.6159.0 59.5 60.0 60.5 61.0 61.5 62.0 62.5 63.0 63.5 64.0
0.60
59.0 59.5 60.0 60.5 Degree
61.0 of61.5 62.0
Urbanization 62.5 63.0 63.5 64.0
0.60
Figure 1.14:
59.0 Development
59.5 60.0 and
60.5Urbanization
Degree in Tanzania
61.0 of61.5 62.0
Urbanization 62.5 63.0 63.5 64.0
Figure
Degree 4.1.13
of Urbanization
0.50 Figure 4.1.13
0.50
0.49 Figure 4.1.13
Index
0.50
0.49
0.48
Index
0.49
0.48
Development
0.47
Index
0.48
Development
0.47
0.46
Development
0.47
0.46
0.45
0.46
0.45
0.44
Human
0.45
0.44
0.43
Human
0.44
0.43
0.42
Human
0.43
0.42
0.41
0.4224
0.41 25 26 27 28 29 30 31
24 25 26 27 of Urbanization
Degree 28 29 30 31
0.41
24 25 26 27 28
Degree of Urbanization 29 30 31
Figure
Degree in 4.2.1
China
of Urbanization
0.72 Figure 4.2.1
0.72
0.71 Figure 4.2.1
Index
0.72
0.71
Index
0.70
0.71
Development
Index
0.70
0.69
Development
0.70
0.69
0.68
Development
0.69
0.68
0.67
0.68
0.67
Human
0.66
0.67
Human
0.66
0.65
Human
0.66
0.65
0.64
0.6542
0.64 43 44 45 46 47 48 49 50 51 52 53 54
42 43 44 45 46 Degree
47 of 48 49
Urbanization 50 51 52 53 54
0.64
42 43 44 45 46 Degree
47 of 48
Urbanization 50
49 51 52 53 54
Figure
Degree 4.2.3
of Urbanization
Figure Figurein 4.2.3
India
0.59
0.58 Figure 4.2.3
Index
0.59
0.58
Index
0.57
0.58
Development
Index
0.57
0.56
Development
0.57
0.56
0.55
Development
0.56
0.55
0.54
0.55
0.54
Human
0.53
0.54
Human
0.53
0.52
Human
0.53
0.52
0.51
0.5129.0
0.52 29.5 30.0 30.5 31.0 31.5 32.0 32.5
Degree 31.0 31.5 32.0 32.5
0.51
Degree 31.0 31.5 32.0 32.5
Figure
Degree 4.2.5
of Urbanization
0.69 Figure 4.2.5
0.69 Figure 4.2.5
Index
0.68
0.69 38
Index
0.68
tent
0.67
ex
0.68
0.56
0.55
0.54
De
Devel
Develop
0.55
0.54
Human
0.54
Human
0.53
0.52
Human 0.53
0.52
0.51
0.5229.0
0.51 29.5 30.0 30.5 31.0 31.5 32.0 32.5
29.0 29.5 30.0 Degree
30.5of Urbanization
31.0 31.5 32.0 32.5
0.51
Figure 29.0
1.21: Development
29.5 and
30.0Urbanization in Indonesia
30.5of Urbanization
Degree 31.0 31.5 32.0 32.5
Figure
Degree 4.2.5
of Urbanization
0.69 Figure 4.2.5
0.69 Figure 4.2.5
Index
0.68
0.69
Index
0.68
Development
0.67
Index
0.68
Development
0.67
0.66
Development
0.67
0.66
0.65
0.66
Human
0.65
Human
0.64
0.65
Human
0.64
0.63
0.64
0.6345 46 47 48 49 50 51 52 53
45 46 47 48
Degree of 49 50
0.63
45 46 47 48 49 50
Figure
Degree in 4.2.7
Malaysia
of Urbanization
0.78 Figure 4.2.7
0.78 Figure 4.2.7
Index
0.78
Index
0.77
Development
Index
0.77
Development
0.77
0.76
Development
0.76
0.76
Human
0.75
Human
0.75
Human
0.75
0.74
0.7466 67 68 69 70 71 72 73 74
66 67 68 69
Degree of 70 71
0.74
66 67 68 69 70 71
Figure
Degree 4.2.11
of Urbanization
Thailand
0.73 Figure 4.2.11
Index
0.73
0.72
Index
0.72
Development
Index
0.72
0.71
Development
0.71
Development
0.71
0.70
0.70
Human
0.70
0.69
Human
0.69
Human
0.69
0.68
0.6837 38 39 40 41 42 43 44 45 46 47 48 49
37 38 39 40 41 Degree
42 of 43 44
0.68
37 38 39 40 41 Degree
42 of 43 44
Figure
Degree 4.3.1
of Urbanization
0.82 Figure 4.3.1
0.82 Figure 4.3.1
0.81
Index
0.82 39
0.81
Index
0.80
tent
0.81
ex
0.80
0.71
0.70
De
Devel
Develop
0.70
Human
0.70
0.69
Human
0.69
Human
0.69
0.68
0.6837 38 39 40 41 42 43 44 45 46 47 48 49
37 38 39 40 41 Degree
42 of 43 44
0.68
Figure 1.29:
37 Development
38 39 40and Urbanization
41 Degree in Argentina
42 of 43 44
Figure
Degree 4.3.1
of Urbanization
0.82 Figure 4.3.1
0.82 Figure 4.3.1
0.81
Index
0.82
0.81
Index
0.80
Development
0.81
Index
0.80
Development
0.79
0.80
Development
0.79
0.78
0.79
0.78
0.77
Human
0.78
0.77
Human
0.76
0.77
Human
0.76
0.75
0.76
90.00 90.25 90.50 90.75 91.00 91.25 91.50
0.75
90.00 90.25 90.50
Degree of90.75 91.00
Urbanization 91.25 91.50
0.75
90.00 90.25 90.50
Degree 90.75 91.00
of Urbanization 91.25 91.50
Figure
Degree in 4.3.3
Bolivia
of Urbanization
0.67 Figure 4.3.3
0.67 Figure 4.3.3
Index
0.67
Index
0.66
Development
Index
0.66
Development
0.66
0.65
Development
0.65
0.65
Human
0.64
Human
0.64
Human
0.64
0.63
0.6364.0 64.5 65.0 65.5 66.0 66.5 67.0 67.5 68.0
64.0 64.5 65.0 65.5
Degree of66.0 66.5
Urbanization 67.0 67.5 68.0
0.63
64.0 64.5 65.0 65.5 66.0 66.5
Degree of Urbanization 67.0 67.5 68.0
Figure
Degree 4.3.5
of Urbanization
Figure Figurein 4.3.5
Brazil
0.75 Figure 4.3.5
Index
0.75
0.74
Index
0.74
Development
Index
0.74
0.73
Development
0.73
Development
0.73
0.72
0.72
Human
0.72
0.71
Human
0.71
Human
0.71
0.70
0.7082.5 83.0 83.5 84.0 84.5 85.0 85.5
82.5 83.0 83.5Degree of84.0
Urbanization84.5 85.0 85.5
0.70
82.5 83.0 83.5Degree of84.0
Figure
Degree 4.3.7
of Urbanization
0.72 Figure 4.3.7
0.72 Figure 4.3.7
Index
0.72
0.71 40
Index
0.71
tent
ex
0.73
0.72
De
Devel
Develop
0.72
Human
0.72
0.71
Human
0.71
Human
0.71
0.70
82.5 83.0 83.5 84.0 84.5 85.0 85.5
0.70
82.5 83.0 83.5Degree of84.0
0.70
Figure 82.5
1.35: Development
83.0 and 83.5
Urbanization in Colombia84.5
Degree of84.0
Urbanization 85.0 85.5
Figure 4.3.7
0.72 Figure 4.3.7
0.72 Figure 4.3.7
Index
0.72
0.71
Index
0.71
Development
Index
0.71
0.70
Development
0.70
Development
0.70
0.69
0.69
Human
0.69
0.68
Human
0.68
Human
0.68
0.67
73.5 74.0 74.5 75.0 75.5 76.0
0.67
73.5 74.0 74.5 of Urbanization
Degree 75.0 75.5 76.0
0.67
73.5 74.0 74.5 75.0
Degree of Urbanization 75.5 76.0
Figure
Figure 1.37: Development and Urbanization in 4.3.9
Mexico
0.760 Figure 4.3.9
0.760
0.755 Figure 4.3.9
Index
0.760
0.755
Index
0.750
0.755
Development
Index
0.750
0.745
Development
0.750
0.745
0.740
Development
0.745
0.740
0.735
0.740
0.735
Human
0.730
0.735
Human
0.730
0.725
Human
0.730
0.725
0.720
0.72576.0
0.720
76.5 77.0 77.5 78.0 78.5 79.0
76.0 76.5 77.0Degree of77.5
0.720
76.0 76.5 77.0Degree of77.5
Figure 4.3.11
Venezuela
0.77 Figure 4.3.11
Index
0.76
0.77
Index
0.76
Development
0.75
Index
0.76
Development
0.75
0.74
Development
0.75
0.74
0.73
0.74
Human
0.73
Human
0.72
0.73
Human
0.72
0.71
0.72
88.55 88.60 88.65 88.70 88.75 88.80 88.85 88.90
0.71
88.55 88.60 88.65 88.70of Urbanization
Degree 88.75 88.80 88.85 88.90
0.71
88.55 88.60 88.65 88.70of Urbanization
Degree 88.75 88.80 88.85 88.90
41
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Urbanization and Structural Transformation

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Urbanization and Structural Transformation

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Series 2

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An overview of Mexico City. © UN-Habitat/Julius Mwelu

Introduction a significant share of the national wealth. For

1 World Bank, 2009a

of USD13 10,000 per capita before becoming 70

13 Timmer, 2007; Timmer and Akkus, 2008

Productivity Growth results from A recent study that focused on structural

Africa The magnitude of the coefficient represents the

Table 1.1: Economic Development and Urbanization in Africa

Botswana -1.364 0.036 17.26 0.00 35.879 0.00

Ethiopia -0.256 0.038 10.15 0.00 28.801 0.00

Ghana 0.013 0.011 21.68 0.00 41.389 0.00

Kenya 0.114 0.017 18.59 0.00 40.965 0.00

Nigeria 0.277 0.005 11.89 0.00 40.054 0.00

South Africa 0.270 0.006 3.01 0.015 30.015 0.011

Tanzania 0.074 0.014 32.72 0.00 43.802 0.00

Uganda 0.080 0.027 10.53 0.00 34.280 0.00

Note: Dependent variable is HDI

An over view of Nairobi, Kenya by night. © UN-Habitat/Julius Mwelu

Figure 1.3: Degree of urbanization, productivity and employment in Botswana

the agriculture sector in 2013. Hence, the Figure 4.1.4

absorbed in the sector is engaged in low productive

Log of Value Added per

Log of Value Added per