Patterns of Urbanization and Economic Development

Abstract

Countries in sub-Saharan Africa (SSA) are urbanizing at an unprecedentedly fast rate. This trend has the potential to affect the welfare of households by altering the degree of urban proximity as well as the size of the existing urban areas. While ample evidence exists regarding the effect of urban proximity, rigorous empirical evaluation of the heterogeneous effect of different sized urban areas in the region is scant. The absence of research in this dimension is often attributed to the lack of an objective and a disaggregated measure of the level and dynamics of urbanization. Studies presented in this thesis aim at bridging this gap by combining satellite-based nighttime light (NTL) intensity data and standard definitions of urbanization to study the implications of urbanization on households’ welfare and livelihood in Ethiopia. The main research questions explored in this thesis are: (i) Does the effect of urbanization on household welfare depend on the degree of urbanization? (ii) What are the heterogeneous effects of urban proximity on nutritional outcomes? (iii) Does the degree of urbanization influence the degree of intergenerational mobility? And (iv) Which interventions are effective to improve the delivery of agricultural extension service in remote areas? <br /> To address the first three questions, three rounds of Ethiopian Living Standards Measurement Study-Integrated Surveys on Agriculture (LSMS-ISA) are geo-spatially linked to NTL data. The first three analytical chapters in the thesis (addressing the first three questions listed above) are organized in such a way as to capture the effect of urbanization on welfare across different generations. Chapter 2 examines the effect of urbanization on broader indicators of household welfare based on the New Economic Geography (NEG) framework and threshold data analysis technique. The study finds that intermediate towns are more strongly associated with household welfare as compared to large towns, small towns, and the rural hinterland. Chapter 3 examines the effect of the distance to and the size of the proximate urban areas on children’s health and nutrition outcomes. An Instrumental Variables (IV) approach is combined with Inverse Probability Weighting (IPW) to account for endogeneity and self-selection issues in the estimation of the basic model. The study finds a statistically and economically significant positive effect of investment in rural infrastructure on health and nutrition outcomes. It also finds that, for households in intermediate and large towns, diet diversity is higher (by 1.2 percentage points) and child stunting is lower (by about 3 percentage points) compared to households in rural areas. Chapter 4 uses ordered logistic regression method to assess the intersection between urbanization and intergenerational mobility in occupational status. It finds that intergenerational mobility in occupational status is weaker in large urban areas, and this is largely explained by huge inequality in educational attainment. Once individual education level is accounted for, large urban areas offer better mobility in occupational status. <br /> For the fourth research question, which is addressed in Chapter 5, a choice experiment was conducted to elicit the preferences of 761 agricultural Extension Agents (EAs) for job attributes. A novel random parameters logit model (RPL) is used to estimate parameters of interest and to simulate the impact of possible policy interventions. Results show that offering education opportunities is by far the most powerful instrument to attract and retain EAs. It increases the uptake of the extension job in remote locations by 77 percentage points, which is significantly higher than the effect of doubling current salary levels. EAs also expressed strong preferences for work environments with basic amenities, housing, transportation services, and well-equipped Farmer Training Centers (FTCs). <br /> The overarching finding from all the chapters is that while there is a considerable rural-urban gap in living standards, these spatial disparities are underlined by pervasive differences in access to basic public services and employment opportunities. Therefore, policy interventions that target to improve overall welfare as well as reduce the spatial imbalance need to remove the constraints facing isolated households in remote areas as well as the marginalized poor in urban areas. Accordingly, the thesis identified a set of relevant policy recommendations tailored to the different locations along the rural-urban spectrum, based on their degree of urbanization and their level of economic development.