Seeing Growth from Space: Urban Income Differentials, Migration, and Economic Progress in Cross-Country Analysis

Abstract

Urbanization and economic growth have historically been almost synonymous. But over the last 30 years, dramatic migration to cities in many emerging economies has been associated with only modest increases in income level. I postulate that the type of urbanization matters. Using night-time-light data to compare income levels across different types of cities, I find that countries with high income differentials between their largest cities and the rest of the country tend (all else equal) to grow slowly. The evidence suggests that when large cities are much richer relative to the rest of the country, migration occurs largely to periurban districts around them. Because these peri-urban districts have poor infrastructure, greater urbanization is not associated with the economic dynamism that cities traditionally generate.