Costs and Benefits of Urbanization

Urbanization has both benefits and costs. This chapter summarizes research findings on how urbanization enhances productivity and economic growth in both rural and urban sectors, taking the case of India. It studies the relationship between urbanization and growth. Based on extensive data analyses of urbanization, it finds no impact of urban–rural inequalities on urbanization, but significant impact on the population of the largest city in the state. When accounting for the two-way relationship between urbanization and the rural–urban income ratio, it finds that urbanization increases urban–rural inequalities initially, but at higher levels reduces them. Urbanization benefits rural development since the chapter finds that it has a positive impact on increasing the rural–urban income ratio, and the evidence regarding remittances. Policy implications regarding telecommuting and investments in urban infrastructure are summarized. Lessons from India and the People’s Republic of China for each other’s urbanization are discussed.

Human Capital and Urbanization in the People’s Republic of China

This chapter explores the relationship between human capital development and urbanization in the People’s Republic of China, highlighting the Hukou system and decentralized fiscal system. Educated workers disproportionately reside in urban areas and in large cities, and the returns to education are higher in urban areas relative to those in rural areas, and in large, educated cities relative to small, less educated cities. In addition, the external returns to education in urban areas are at least comparable to the magnitude of private returns. Rural areas are the major reservoir for urban population growth, and the more educated have a higher chance of moving to cities and obtaining urban Hukou. As for health, rural–urban migration is selective in that healthy rural residents choose to migrate. However, occupational choices and living conditions are detrimental to migrants’ health. While migration has a positive effect on migrant children, its effect on ‘left-behind’ children is unclear.

Growth, Inequality, Poverty, and Urbanization: the Case of India

In this chapter the analysis is pursued at three levels of disaggregation: states, districts, and cities with populations over one million. At the state level, urbanization does not show any significant impact on rural poverty, though it tends to reduce poverty in urban areas. Growth influences urbanization positively, while urbanization and expansion in non-agricultural activities both contribute to economic growth. Although urban inequality is not strongly correlated with urbanization and growth, the relationship is distinct. While poverty tends to decline, inequality rises in the process of growth and urbanization. The district-level data confirm a positive association between urbanization, work participation rate, percentage of workforce engaged in non-household manufacturing and services, literacy, growth, and inequality, though the degree of association is mild. Urbanization shows a strong beneficial effect on poverty at both the district and city levels.

Air Pollution and Traffic Congestion in Urban India

This chapter provides a critical overview of urban air pollution and traffic congestion in India. It discusses temporal and spatial variations in the level of urban air pollution and traffic congestion in the country and challenges posed by them. India loses about 2 per cent of its GDP because of urban air pollution. Urbanization of small-scale industries and increasing demand for private vehicles are major determinants of urban air pollution and traffic congestion. Legitimacy in enforcement of polices is a strong predictor of success of a policy. Growing demand for green cities coupled with transparency in governance will reduce frictions arising from pollution and congestion.

Congestion and Pollution in Chinese Cities

The rapid urbanization of the People’s Republic of China (PRC) is assumed to generate greater economic benefits in terms of income, but also result in greater social costs in terms of negative externalities. This chapter focuses on the direct relationship between city growth and the urban diseases of congestion and pollution in the PRC. The ‘demand–supply–government’ framework is employed to analyse the sources and consequences of these major urban diseases. The roles of market power and political power in congestion and pollution mitigation are also discussed in this chapter.

Human Capital and Urbanization in India

This chapter analyses the human capital base of population, workers, and migrants and compares the human capital base of the population and workers in rural and urban areas. The nature and extent of the private sector’s role in human capital formation are also looked at. This chapter finds that earnings of workers increase substantially at each successive level of education and returns are far higher at the graduate-and-above level. The contribution of rural–urban migration in increasing the urban population has been around one-fifth. In that sense, urban growth has been exclusionary. It observes that urban areas are considerably better endowed with the quality of human capital and the average returns to education are higher in urban areas compared with rural areas, and rural–urban gaps in average return to education are increasing over time. It calls for active policy to promote rural–urban migration that will boost urban as well as national income. In this regard it argues for an active policy of promoting the labour-intensive manufacturing sector which is likely to promote more migration and reduce the selectivity bias in rural–urban migration.

Urbanization, Land, and Housing in India: Options Amid the State and the Market Failures

Housing or shelter security is the key to rapid as well as inclusive urbanization, which different countries have addressed in their own way in the course of modern history. India too has, after a hiatus of half a century, introduced public housing programme for the first time in 2006, which has seen many modifications. This chapter attempts to answer the questions as to why the state and market has failed to meet the housing needs of the urban poor, and thus how do the urban poor access housing/shelter and what explains different levels of housing achievements by different states in India? The chapter draws on available secondary data to answer these questions and suggests what needs to be done going forward.

Rural-to-Urban Migration and the Urban Labour Market: the Case of India

In relation to urbanization, findings suggest that the unemployment rate after migration tends to decline. States with higher urbanization levels reveal a larger increase in regular wage employment after migration. With an increase in city size, the migration rate rises mainly because employment prospects are better in large cities due to agglomeration effects. Migration, urban informal sector employment, and the proportion of the Scheduled Caste population in urban and rural areas are all positively associated, suggesting that the socially backward groups are more likely to migrate from rural areas and get absorbed in the urban informal sector. This pattern is accompanied by a decline in the incidence of poverty in both rural and urban areas: even the urban informal sector activities are able to provide relatively better job opportunities and higher living standards.

Introduction

This chapter provides an Introduction to the edited volume. After briefly outlining the background on urbanization in Asia, it discusses the benefits and costs of urbanization, leading to the conclusion that Asia’s urbanization will be led by megacities. Finally, we offer policy recommendations which may be applicable to other countries and continents.

Urbanization, Water Supply, and Sanitation in India

The chapter aims to review the state of water and sanitation facilities in Indian cities, and policy interventions undertaken to address inadequacies in the provision of these services. The power-law relationship reveals that greater autonomy in management helps in realizing economies of scale. The chapter also measures technical and scale efficiency in the provision of these services in Indian cities. Estimates of technical efficiency uncover that water and sanitation service providers have the potential to increase service levels by 37 and 48 per cent respectively. Note that most Indian urban water and sanitation utilities are operating at decreasing returns to scale. This implies that services may be charged following the rule of marginal cost pricing. The chapter also finds that there are consumption-metering advantages in improving efficiency of water utilities.