Breaking into Tradables
Many cities in developing economies, particularly in Africa, are experiencing urbanization without industrialization. This paper conceptualizes this in a framework in which a city can produce non-tradable goods and -- if it is sufficiently competitive -- also internationally tradable goods, potentially subject to increasing returns to scale. A city is unlikely to produce tradables if it faces high urban and hinterland demand for non-tradables, or high costs of urban infrastructure and construction. The paper shows that, if there are increasing returns in tradable production, there may be multiple equilibria. The same initial conditions can support dichotomous outcomes, with cities either in a low-level (non-tradable only) equilibrium, or diversified in tradable and non-tradable production. The paper demonstrates the importance of history and expectations in determining outcomes. Essentially, a city can be built in a manner that makes it difficult to attract tradable production. This situation might be a consequence of low (and self-fulfilling) expectations or history. The predictions of the model are consistent with several observed features of African cities.
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| Format: | Working Paper biblioteca |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017-01
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| Subjects: | city, urban development, structural transformation, tradable goods, urbanization, |
| Online Access: | http://documents.worldbank.org/curated/en/195191485180968902/Breaking-into-tradables-urban-form-and-urban-function-in-a-developing-city https://hdl.handle.net/10986/25959 |
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| Summary: | Many cities in developing economies,
particularly in Africa, are experiencing urbanization
without industrialization. This paper conceptualizes this in
a framework in which a city can produce non-tradable goods
and -- if it is sufficiently competitive -- also
internationally tradable goods, potentially subject to
increasing returns to scale. A city is unlikely to produce
tradables if it faces high urban and hinterland demand for
non-tradables, or high costs of urban infrastructure and
construction. The paper shows that, if there are increasing
returns in tradable production, there may be multiple
equilibria. The same initial conditions can support
dichotomous outcomes, with cities either in a low-level
(non-tradable only) equilibrium, or diversified in tradable
and non-tradable production. The paper demonstrates the
importance of history and expectations in determining
outcomes. Essentially, a city can be built in a manner that
makes it difficult to attract tradable production. This
situation might be a consequence of low (and
self-fulfilling) expectations or history. The predictions of
the model are consistent with several observed features of
African cities. |
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