Why Cities Are the Beating Heart of Development—Even in the Poorest Nations

Over the past half-century, the developing world has witnessed an urban explosion. Countries like Bangladesh, Kenya, and the Democratic Republic of the Congo have seen rapid urban growth despite stagnant or even declining per capita incomes. This phenomenon goes in the opposite direction of the one observed throughout the economic development of the West, where cities typically grew in correspondence with industrialization and rising wealth.

A New Model of Urbanization Without Wealth

Historically, in order to maintain a city, a locality needed agricultural surpluses and strong governance. In ancient Rome, the Italian self-governing Communes in Medieval times became powerful cities–not because their citizens were wealthy–but because they could marshal resources to feed and manage dense populations either from their empire or from the geographically immediate countryside. In contrast, today’s urban growth in developing countries often occurs in the absence of either economic prosperity or institutional strength.

Glaeser (2015) explains this through the lens of globalization. Without international trade, urbanization needs domestic agricultural productivity: cities need to be fed. When international trade is possible, food can be imported, and urban growth can be driven by rural desperation rather than local agricultural surplus. Port-au-Prince in Haiti, for example, survives on imported rice from the U.S., not local harvests. This shift means that cities can grow even when the countryside is impoverished.

This insight is crucial: urbanization in poor countries is not a mistake or anomaly. It’s a rational response to global economic forces and local hardship. People move to cities not because they are thriving, but because they offer better opportunities than rural life.

A Dire Story or a Different Path to Development?

Even in the challenging circumstances of developing countries, cities are still potentially a flywheel of economic development. They concentrate people, ideas, and resources in ways that foster innovation, education, and political mobilization. Even in poor countries, urbanization correlates strongly with long-term income growth, even if this happens in a pattern that is different from the one experienced by Western nations.

The sheer density of the population is a conduit to potential future growth, as it facilitates the spread of knowledge and the formation of institutions. Dense urban environments make it easier for people to collaborate, organize, and demand accountability.

In developing countries, this dynamic is unfolding in the present moment: urban governance is often weak, but the very process of urbanization may be the beginning of institutional improvement. Cities force governments to confront problems such as sanitation, transportation, and crime, putting pressure on them to build state capacity and improve institutions to address these issues.

Of course, urbanization is not without its costs. Poor mega-cities face severe externalities: disease, congestion, pollution, and crime. These problems are exacerbated by weak governance and limited resources. Infrastructure is a key part of the solution. Sewers, roads, and public transport can mitigate the downsides of density. But here too, institutional quality matters. In smaller cities or well-governed ones, private provision of infrastructure may be efficient. In larger, poorly governed cities, public provision, despite its inefficiencies, may be necessary to prevent corruption and land grabs.

Urbanization in Africa: A Tale of Promise and Constraint

Loris Lockhart from the Africa Urban Lab offers a more granular view of what Glaeser (2015) noted 10 years ago. Africa is urbanizing at a historically low income level, starkly lower than the West did, but also lower than Latin America or East Asia. This “urbanization without income” is consistent with Glaeser’s view and leaves a heavier burden of challenges for African urban dwellers. Poor governance, small state capacity, and a lack of resources are evident in most African megacities and are quantitatively more relevant than in 19th-century Chicago or New York and Mexico City in the 1960s.

As can be seen in the figure below, the link between urbanization and income is weaker in Africa than in all other continents.

Dar es Salaam gives one striking example of weak institutions in an urban context: there, urban regulation has very stringent requirements on plot size, placed at 300m². This implies that most people are excluded from formal housing and have to choose between informal dwellings or very long commutes. On the one hand, they can take advantage of the opportunities of the city but endure very low standards of living; alternatively, city workers can choose long commutes, undermining the positive externalities of the city and resulting in fragmented labour markets. In other words, weak governance is resulting in inefficient urban outcomes. According to Lockhart’s data, Dar es Salaam’s poorest quintile of the population spends half of its household budgets in motorized transport, adding hardship to hardship.

Figure 1. Relationship between urbanization in 2010 (%) and income per capita (log GDP, PPP constant at 2010USD). (Source: Dercor et al., 2019).

 African cities also offer good examples of how to improve their situation: in Freetown (Sierra Leone), a new property tax system has been implemented, also leveraging on aerial pictures of the city. This allows the Freetown to increase its funding and improve its residents’ standard of living.

Conclusion

Urbanization can drive development even in poor countries, especially in an open global economy where cities no longer depend solely on domestic agricultural surpluses. Weak institutions and inadequate infrastructure can blunt the benefits of density, leading to congestion, crime, and inefficiency. Therefore, infrastructure and governance must evolve together for long-term success to be realized.

Cities are not just places—they are processes. They embody the tensions and possibilities of development. In the developing world, cities are messy, chaotic, and often unjust. But they also have the potential to be vibrant, dynamic, and bursting with potential.

References:

• Dercon, Stefan, et al. "Can Africa learn from the Chinese urbanisation story?." (2019).

• Glaeser, Edward L. Urbanization and its discontents. No. w26839. National Bureau of Economic Research, 2020.