Urbanization and (In)Formalization
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World Bank, Washington, DC
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Two of the great stylized predictions of
development theory, and two of the great expectations of
policy makers as indicators of progress in development, are
inexorable urbanization and inexorable formalization.
Urbanization is indeed happening, beyond the "tipping
point" where half the world's population is now
urban. However, formalization has slowed down significantly
in the past quarter century. Indeed, informality has been
increasing. This disconnect raises a number of questions for
development analysis and development policy. Is the link
between urbanization and formalization more complex than
what had been thought? What does this mean for policy? The
first core section of this paper asks what exactly is meant
by formality and informality. The second core section turns
to processes of urbanization and asks how these processes
intersect with and interact with the incentives to
formalize. The paper examines why cities attract the
informal sector and the role that urbanization plays in
growth and job creation through both the formal and informal
sectors. Cities generate agglomeration benefits in the
informal sector, perhaps more so than for the formal sector.
The third core section is devoted to policy. At the current
conjuncture, agglomeration benefits make a strong case for
urbanization as an integral part of development strategy,
but concerns about jobless growth and about urban poverty
require a focus on the informal sector.
Palabras clave
AGGLOMERATION ECONOMIES, BASIC SERVICES, CONCERN OF POLICY MAKERS, CREATING JOBS, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, EARNING, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMICS, ECOSYSTEM, EDUCATED MIGRANTS, EMPLOYMENT GROWTH, EMPLOYMENT MEASURE, EMPLOYMENT SHARE, EXTERNALITIES, FIRM SIZE, FORMAL SECTOR WAGE, INCIDENCE OF POVERTY, INCOME, INDUSTRIALIZATION, INFORMAL ECONOMY, INFORMAL EMPLOYMENT, INFORMAL SECTOR, INFRASTRUCTURE SERVICES, INNOVATION, INTENSIVE INDUSTRIES, JOB CREATION, JOBLESS GROWTH, JOBS, LABOR COSTS, LABOR FORCE, LABOR LAWS, LABOR MARKET, LABOR MARKET RIGIDITIES, LABOR MARKETS, LABOR PRODUCTIVITY, LABOR PRODUCTIVITY GROWTH, LABOR REGULATIONS, LABOUR, LABOUR FORCE, LAND USE, LAND USE REGULATIONS, LARGE CITIES, LARGE POPULATION, LEVELS OF PRODUCTIVITY, LIVING CONDITIONS, LOCAL INFRASTRUCTURE, LOCAL POPULATION, LOCATION DECISIONS, MANUFACTURING INDUSTRIES, MANUFACTURING INDUSTRY, METROPOLITAN AREAS, MIGRANTS, MINIMUM WAGE, MODERNIZATION, NATIONAL AUTHORITIES, NEWSLETTER, OCCUPATIONS, OUTPUTS, PACE OF URBANIZATION, PAYING JOBS, PERMANENT SETTLEMENT, PLANT PRODUCTIVITY, POLICY DISCUSSIONS, POLICY IMPLICATIONS, POLICY MAKERS, POLICY RESEARCH, POLICY RESEARCH WORKING PAPER, POLICY RESPONSE, POPULATION DENSITY, POPULATION INCREASES, PRODUCTIVITY CONVERGENCE, PRODUCTIVITY GAINS, PRODUCTIVITY GROWTH, PRODUCTIVITY GROWTH RATE, PRODUCTIVITY LEVELS, PROGRESS, PROPERTY RIGHTS, RENTS, ROADS, RURAL AREAS, RURAL DEVELOPMENT, RURAL EMPLOYMENT, RURAL POPULATION, RURAL POVERTY, SAFETY, SAFETY NET, SANITATION, SELF EMPLOYED, SERVICE DELIVERY, SKILLED WORKERS, SLUMS, SMALL ENTERPRISES, SOCIAL COHESION, SOCIAL POLICY, SOCIAL PROGRAMS, STEEL FACTORY, SUPPLIERS, TAXATION, TOTAL FACTOR PRODUCTIVITY, TRANSPORTATION, UNEMPLOYED, UNEMPLOYMENT, URBAN, URBAN AREA, URBAN AREAS, URBAN EMPLOYMENT, URBAN INFRASTRUCTURE, URBAN MIGRATION, URBAN POLICIES, URBAN POPULATION, URBAN POPULATIONS, URBAN POVERTY, URBAN SECTOR, URBAN SERVICES, URBAN SETTLEMENTS, URBAN UNEMPLOYMENT, URBANIZATION, VULNERABILITY, WAGES, WORKER, WORKFORCE, YOUNG MEN