in Africa

This evolution is more consistent with what has been called “premature urbanization” (Gollin, Jedwab, and Vollrath 2016). Figure 2.5 shows that while urbanization has accompanied economic transformation in most parts of the world, it has not in Africa. In Nigeria and South Africa, for example, the shares of manufacturing in GDP have been declining as those countries have urbanized. Even within cities, 25 percent of the urban population in Sub-Saharan Africa, and about 30 percent in Mozambique, Sierra Leone, and Tanzania, is still reported to be employed in agriculture.4 The share of tradables in Asian cities, at about 70 percent, is 20 percentage points higher than in African cities (Lall, Henderson, and Venables 2017).

These findings raise the question about why firms and workers would move to the city in the first place if they are not getting productivity-enhancing benefits. It first bears noting that the equation of urbanization with industrialization and even increased productivity is a historically recent one. Bairoch (1988) points out that urbanization began with the emergence of surplus arising from sedentary agriculture, and cities served as a provider of services and distribution of rents long before the arrival of industrialization. In his most negative take, he sees Rome, the largest city in the ancient world, as an exactor of tribute, a “parasitic” city that had little in the way of industry, and sees many developing country cities as “Romes without empires” (Bairoch 1988). Gollin, Jedwab, and Vollrath (2016) echo and update this mechanism by arguing that developing country agglomerations are distribution points for

FIGURE 2.5 Urbanization and Economic Transformation Have Not Gone Hand in Hand in Africa

Share of manufacturing, percent of GDP 30

20

20

0

20 40 60

Urbanization rate, percent of population 80

Sub-Saharan Africa, 2019 All excluding SSA, 2019 Kenya, 1985–2019 South Africa, 1985–2019 Fitted values Fitted values Nigeria, 1985–2019

Source: World Bank staff elaboration based on World Development Indicators (accessed 2021). Note: SSA = Sub-Saharan Africa. 100

natural resource wealth—they are consumption not production cities.5 International aid, whose first stop is generally the capital, could also serve to support consumption. Ethiopia, for instance, receives roughly 4 percent of GDP in foreign aid—a large share considering that Chile’s entire mining sector constitutes 9 percent of GDP. In a similar vein, migrants seek out government-financed health and education services and amenities unavailable in the rural areas. Finally, Ades and Glaeser (1995) stress the political reasons for urbanization, particularly in single big cities, because spatial proximity to power increases political influence or economic rents. They find that dictatorships have central cities 50 percent larger than democracies. In these rentdistributing or consumption cities, utility derived from these sources—not firm productivity—needs to exceed congestion costs. As Krugman and Elizondo (1996) note, high internal transport costs will lead domestic producers to locate close to income sources rather than produce in less costly venues. Locally concentrated income drives up real estate prices, requiring higher wages for local labor and higher marginal costs for firms. In this view, the wage elasticity captures little of the productivity of local industry or the city.

Where fertility rates are not declining quickly or are stalling, natural growth has become an increasingly important factor in driving urban population growth in Africa. Although the picture varies by subregion, the overall trends for Sub-Saharan Africa, from the least urbanized East to the more urbanized South, show a decline in the contribution of net in-migration to urban growth in favor of the natural growth component. In the least urbanized East African subregion (which was about 25 percent urbanized in 2015), migration contributes the most to urban population growth and is about twice as much as natural growth. In contrast, in the more urbanized Southern African subregion (which was 60 percent urbanized in 2015), starting around 1995, more urban residents began leaving cities for rural areas than rural residents were leaving for cities (that is, the contribution of net migration to urban population growth became negative).

Yet in the face of all these factors, urban incomes in Sub-Saharan Africa are significantly higher than rural incomes, even in the absence of significant spatial economic transformation. Poverty is also declining fastest in large cities (Nakamura, Paliwal, and Yoshida 2018). Low rural productivity growth, rather than large agglomeration effects, partly explains why urban incomes are comparatively so much higher than rural incomes in the region (Henderson, Nigmatulina, and Kriticos 2019). Further, provision of services is lagging in rural areas: moving from a rural area to an urban one is associated with improved access to water, sanitation, and electricity by about 45 percent, 35 percent, and 50 percent, respectively (Hommann and Lall 2019). Both these patterns put agricultural productivity and rural development squarely on the agenda for policies aimed at urban areas as well as lagging regions—and indeed, national growth policy (see Fuglie et al. 2019). These findings clearly support the ongoing agenda to make