Urbanization in developing countries

Date of Award


Degree Type


Degree Name

Doctor of Philosophy (PhD)




Stuart Rosenthal


Developing countries, Urban economics, Urbanization, Housing policy

Subject Categories

Economics | Growth and Development | Social and Behavioral Sciences


This dissertation looks at the relationship between urbanization processes in developing countries and effective policies to manage rapid urbanization. Chapter 2 looks at the long-term relationship between per capita GDP and urbanization rates. The paper finds that for the 1960-2000 period, a large number of developing countries have a negative or zero relationship between per capita GDP and urbanization. In a panel data setting, developing countries seem to exhibit a weaker, even if positive relationship, between the two variables. However, once countries that are geographically constrained or are resource rich are controlled for, the relationship between urbanization and per capita incomes for developed and developing countries are not dramatically different. The paper also finds that autocratic countries tend to have a smaller relationship between urbanization and per capital incomes. This seems to imply that for some developing countries urbanizing is driven by political economy factors.

Chapter 3 examines whether the rate at which a country urbanizes has an impact on per capita income growth rate. Per capita income growth is a function of the change of capital per capita and the change in the levels of technology. This paper argues that the change in a country's technology level is a function of the rate of change of urbanization. Therefore, increasing agglomeration gains as a result of the urbanizing process should contribute to productivity growth and hence, economic growth. This paper calculates the effect of urbanization (the rate of change of percent urbanized) on economic growth. The paper finds evidence that urbanization has a dramatic effect on per capita income growth. A one percent increase in urbanization can increase per capita income growth by 0.6 to 0.8 percent. However, it is part of a quadratic process - urbanization increases of over 18 percent in five years begin to have a negative effect on economic growth.

Chapter 4 discusses housing policy in developing countries. It examines recent research findings in light of earlier arguments as to the benefits of more market-oriented approaches. In particular, it reviews: the empirical analysis of the effects of policy on housing supply; the richer understanding of the effects that land market regulations have on housing affordability and the functioning of urban areas; and the alleged mysterious effects that de Soto, for example, claims effective property rights have not only for housing policy but for development more generally. It also examines the effects of the increased emphasis given to community participation, showing how this approach helps to more fully reconcile the incentives faced by beneficiaries of housing policy and donors. Finally, it examines recent literature on the welfare effects of rent control. In sum, the paper concludes that while some of the conjectures as to the likely benefits of more market-based policy have been refuted, that it is now clear that large welfare gains for the poor can be realized from adapting such an approach. Further, this approach appears to be gaining ground as the consensus approach to effective housing policy.


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