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Social and Economic Consequences of Urbanization in Developi

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Tizianna Torres Petter

on 17 April 2014

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Transcript of Social and Economic Consequences of Urbanization in Developi

What are the causes of Urbanization?
Can migration models explain why people choose to urbanize?

What policies may be used to decrease the desire for rural-urban migration?

How can urbanization in India be explained with specific models?

Social Consequences of Urbanization
Economic Consequences
Social and Economic Consequences of Urbanization in Developing Countries
Provides an economic framework for rural-urban migration
Based on the expected rise in salary rather than the actual
Educated have better chances of obtaining a job

Rational choice:
P= Expectation X= Probability

P(πM)= P(WM) x P(XM) the expected wage in manufacturing times the
probability of obtaining a job in manufacturing

P(πA)= P(WA) x P(XA) the expected wage in agriculture times the 
probability of obtaining a job in agriculture

P(πM)> P(πA)the expected wage in manufacturing is higher than in 
agriculture, worker will move to the city.
P(M) = P(A) (Equilibrium)

Ravenstein: Laws of Migration
- “Push and Pull” theory

The Todaro Model
Cost of making the journey:
1) physical distance
2) different forms of cultural barriers
3) political obstacles.

Dependency Theory
What policies the choice of Urbanization - what could make people stay?
Urban bias, investments are mostly made in cities
Investments (to tackle urban unemployment) in urban areas may increases rural to urban migration:

1) expectations of obtaining a job are increasing
2) migration
3) more urban unemployment and less supply of workers in the countryside.

Investments to aim for more balanced wages and incomes in rural- and urban areas

Encourage medium sized cities?
To make it less favorable to set up business in Paris,
French government has since 1950s:

- High rents in Paris
- Large scale investment in infrastructure in other areas
- Given subsidies to firms who set up business in those areas

Criticized project, argued if successful creating industrial cities,
but it did slowed down the urbanization process in Paris

Urbanization process in IndiaTodaro Model:
Case study from 1986 showed that migration to the capital,
Delhi occurred with the expectation of obtaining either a formal,
or an informal sector job.
Resent study by Hewitt Associates in 2008, shows that urban wages in India are increasing with 14-15 percent per year.
- rural wages are lagging behind
Could explain why the population in Delhi has grown
from 4,4 million in 1975  20,9 million in 2015.

Delhi is a center for communication, education and industries, urban bias?

Push and Pull in India
Push factors:
Non­agricultural jobs in rural areas 
Incapacity to grow crops
Not enough income for rural dwellers 
Lack in public services such as roads and public transports
Excluded from the rural finance institutions and have 
little access to credit
Unskilled workers

Pull factors:
Better employment opportunities in urban areas and
Higher expected income compared to what was available in the 
agricultural sector
Educated have better opportunities
Young population, women.

- What is urbanization?
- What are the causes for rural-to urban migration?
- What could be the consequences?
Micro-economic Level
Macro-economic Level
The Phenomenon of Urbanization
History of Urbanization
Two great civilizations around 9000 to 4000 BC
Mesopotamia and Egypt
Dominant but outnumbered in territory and population
A rural world

European Commercial Expansion (14th century)
Capitals such as Paris, London and Madrid
Centers for international trade in Milan and Venice
Reaching of urban populations of 50 000 to 100 000

History of Urbanization
Two great factors in the process of Urbanization

The colonial expansion
Europeans altering structures in the third world
Creating new cities

The Industrial Revolution
Late 18th century in Untied Kingdom
Brought - Machinery
- Factories
- Mass production
- Improved transport and communication
- Differences I living conditions
Work opportunities created rural-urban migration
Expansion of cities through improved transportation systems

History of Urbanization
19th century => Today

1950s – 38% of the total urban population lived in cities of the developing world (275 million)

2008 – the world turned urban

2011 – About 75% of urban population live in the developing worlds cities

History of Urbanization
Urbanization in India
Slow process and steadily rural through the ages
Though longest tradition of urbanization
Political development

Noticeable change happened during the colonial era
Forced imperialist regime
New structures and cities

Upswing of urbanization during late 19th and early 20th century
Due to industrialization
Increase from 25,8 million to 62,4 million urban inhabitants (1901-51)
2001 – 285,4 million urban inhabitants

Trends in Urbanization
Trends are long term indicators
2030 => 2/3 of the world population will live in urban areas
Rural population decrease to start 2015
World population average annual growth rate 1,78% between 2005 and 2030
2030 => over 8 billion people in the world

Growth of cities
Most of the worlds urban population live in developing courtiers
World population increase is most visible in urban areas
Estimated that 2025, 24 out of 29 megacities situated in the developing world

Urbanization as a trigger for development?
Regarded as most important factor for the developed countries modernization
Recent trends show no clear signs of correlation between Urbanization and economic development

Rural-urban migration
Movement from rural to urban areas in pursuit of employment and higher living standards

Future limits of Urbanization
Urban giants
One or two cities where focus is put from
Public and Private investment

Negative for rural areas
Not the same economic activity
Lacking employment opportunities
Lacking in infrastructure

Firms moving to Urban areas
Learn from similar companies
Take advantage of the desperation for jobs
Increased demands in bigger cities

Urbanized cities lack good enough resources for the poor urban parts
Clean water
Renewal of global infrastructure
Estimated investment will cost 57-67 trillion USD in 2030 (McKinsey Global Institute)
Major part of this goes to the developing countries

Migration to cities exceeds the limits of the job opportunities
The cities lack resources to deal with the increasing population
Lack of proper housing
Leads to slums and raising in informal sector

The urban informal sector in developing countries
The consequence of
Large rural-urban migration
Low labor demand but high labor force

Self-employment => Informal sector
Small individual/family firms
Small retail trade and services
Small scale production

Generally legal but not registered

Success => register legally => Enter formal sector

High proportion of the workers live in slum areas

Slums as a Consequence of Urbanization
Rapid Urbanization due to failed policy solutions and urban planning

Signs of Structural Violence
Recognized versus non-recognized slums
Basic human needs (e.g. water, toilets, sewage and waste systems)
Official documents (Social inequality and lack of social security)
Citizens without a city

Consequences of Urbanization on Religion in India
Discussing secularization in India
Politization of identity
The social and religious development,
learning from the Belfast Experience
Applying modernization theory on India
Social Consequences and the Issue with Gender in India
Patriarchal structure of the Society (Traditional, Cultural & Religious)

Caste System and its impact on women


The disadvantage of being a women in India

Women in rural areas

Gender Based Violence/ Trafficking Prostitution

Environmental Effects of Urbanization
The factors contributing to the environmental degradation in urban areas
Environmental effects of economic development in Urban Areas
- Air pollution
- Water contamination
The relation between urbanization, population density & policy variables
Global trends of rapid urbanization and the environmental impact
The uncertainty of the future of the environment & the power of policy variables & institutions
Waste Management
The short/long term effects of Urbanization

Informal sector:
benefits unskilled and uneducated migrants from rural areas
traditional occupations and illegal activities
High % of wages returns to rural area

Formal/informal can become interdepedent

Economic costs of migration
Unplanned urbanization = enhance poverty

Population density costs of living, transportation and housing

Access to public services and infrastructures limited to households who can afford it

A slum economy
One third of the urban population of the developing countries live
Bad living conditions =→ negative impact on human capital→
Todaro paradox:
Investment Migration

Investment Limit slums

Is difficult because lack of formal property rights and land title
Slums are often ineligible for urban planning and underestimation of the number of slum’s dwellers
Modernization theory of slums: the life in slums is only a temporary and transitory phase
But the reality is different: people go out from the rural poverty trap to fall in the slum poverty trap and maintenance in a low skilled, low income and low human capital equilibrium

The Paradoxical role played by the informal sector

The majority of the slum’s dwellers work in the informal sector which represent their main source of income
The informal sector is both:
An answer to a continuous growing labor demand
A consequence of the saturation of the formal sector and its incapacity to provide enough jobs for this demand
It absorbs 50% of the urban labor force

Employs the unskilled workers who cannot find a job in the formal sector.
The importance of the informal sector in India: % of the urban workers employed in the informal sector:
The low wages maintain them in the urban poverty trap

Economists costs of the informal sector:

Does not boost activities than enable economic development and growth
Illegal activities outside the formal economic sphere
Makes it hard for the government to collect taxes

Explain with the agglomeration economic theory

Market accessibility Costs Specialization/productivity/ efficiency/wages

More productivity ⇒more possibility to increase the income and GDP per capita.
However urbanization is not always bring steady growth.
negative effect:
migration from rural area because of the high wages
higher demands for houses and consumptions

Density Transportation costs Exports/Imports of urban/rural products

Resulting in isolation of rural areas from urban goods
”First city bias”: largest city receive inordinately more investments than other major cities
Distant from government, or suffer from benign neglect at best.

Rural migrants constitute 30%- 50% of the urban population growth
Does the population in the rural areas benefit from the migration and urbanization or is it the opposite?
Urbanization can have poverty-reducing effect for the rural areas

Economic migration and labor transfer: increase of well-educated job seekers in urban areas while leaving rural areas depleted of human capital
Economic inequality due to urbanization: India (urban-rural income gap has contributed to rising national inequality) and Philippines (urban-rural income gap helped to reduce national inequality)
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