| World Development Report 2009
Spatial Disparities and Development Policy
Reshaping Economic Geography
November 6, 2008
Read also Reshaping Economic Geography in East Asia
a companion volume to the World
Development Report 2009, which brings together noted scholars to
address the spatial distribution of economic growth in Asia.
Cover - Contents - Foreword - Acknowledgments - Abbreviations - Data
in motion: The Report at a Glance - Density, Distance, and Division
Growing cities, ever more
mobile people, and increasingly specialized products are integral to
development. These changes have
been most noticeable in North America, Western Europe, and Northeast
Asia. But countries in East and South Asia and Eastern
Europe are now experiencing changes that are similar in their scope and
speed. World Development Report 2009: Reshaping Economic
Geography concludes that such transformations will remain essential
for economic success in other parts of the developing
world and should be encouraged.
Place and Prosperity - The world is not flat - Markets Shape the
economic landscape - Putting development in place
Economic growth will be
unbalanced, but development still can be inclusive—that is the message
of this year’s World Development Report. As economies grow from low to
production becomes more concentrated spatially. Some places—cities,
coastal areas, and connected
countries—are favored by producers. As countries develop, the most
successful ones also
institute policies that make living standards of people more uniform
across space. The way to get
both the immediate benefi ts of the concentration of production and the
long-term benefi ts of a
convergence in living standards is economic integration.
Although the problems of economic integration defy simple solutions,
the guiding principle
does not have to be complex. The policy mix should be calibrated to
match the diffi culty of the
development challenge, determined by the economic geography of places.
Today, policy discussions
about geographic disparities in development often start and end with a
spatially targeted interventions. The Report reframes these debates to
include all instruments for
economic integration—institutions, infrastructure, and incentives. The
bedrock of integration
efforts should be spatially blind institutions. As the challenges posed
by geography become more
diffi cult, the response should include connective infrastructure. In
places where integration is
hardest, the policy response should be commensurately comprehensive:
institutions that unite,
infrastructure that connects, and interventions that target.
Scope - Terms - Structure
Nations do not develop by
doing more of the same thing. They must do
different things, and do them better.
Over the years, this has been confi rmed
so often that it now seems almost obvious.
Less obvious but no less important are the
spatial transformations needed for these
structural shifts. Some places are suited
for farming, others for industry, yet others
for services. As economies become industrialized
and more people are employed
in services, their shapes must change, too.
These changes, involving social adjustment
as much as the economic, can take time.
The economic world is not frictionless. The
“what” and “how” of economic production
cannot be decided without deciding the
in motion: Overcoming Distance in North America
When Europeans began to
colonize beyond their shores, the prospects for economic growth in
North America seemed remote. During
the Seven Years’ War (1756–63), as the French and British battled over
Canada, Voltaire wondered why they should fi ght over
“a few acres of snow.” They should have been more interested in the
economic potential of the Caribbean, where climate and soil
were good for growing sugarcane, and they were. Manhattan was famously
traded away by the Dutch in exchange for land around
Suriname. But over time, it has been the few acres of snow and the
rocky landscape of Plymouth (Massachusetts) that gave birth to
the “reversal of fortune” between frigid northeastern America and the
Part One: Seeing Development in
As the world’s economy grows, people and
production are concentrating, pulled as if by
gravity to prosperous places—growing cities, leading areas, and
connected countries. As it
did decades ago in today’s high-income countries, the drive to density
in low- and middleincome
countries can increase the sense of deprivation as the economic
prosperous areas and those left behind widens. And although rapid
advances in transport
and communication increasingly bind together geographically distant
the world and open new opportunities for exchange, political divisions
the fl ow of people, capital, and goods remain. Part one of this Report
defi nes the spatial
dimensions—density, distance, and division—and describes their
evolution with economic
development. Chapters 1, 2, and 3 show how the economic geography at
the local, national,
and international scales is changing, and how the scope and pace of
compare with transformations in the economic geography of North
America, Europe, and
Japan when they were at similar stages of development. This broad sweep
of stylized facts
informs the analysis in part two and the policy discussions in part
three of the Report.
Defining density - Economic concentration -the richer, the denser -
Convergence -rural-urban and within cities - What's different for
Mostly off the world’s radar, on
a dusty plain in West Africa,
is a city of 1.6 million people.
Bisected by the River Niger, its two halves—
with about 800,000 people each—are linked
by only two bridges. The pressure of movement
is so strong that every morning one of
these bridges is dedicated to incoming traffi
c: minibuses, bicycles, motorbikes, pedestrians,
and occasionally private cars. In the
evenings, to leave the center means joining
an exodus of people toward the minibus
depots. Green vans loaded with passengers
fi le out to residential neighborhoods as far
as 20 kilometers away. This is Bamako, Mali.
It contracts into its center every morning
and breathes out again in the evening.
With each breath Bamako grows bigger.
It happens to be one of the fastest-growing
cities in the world.
Defining distance - Economic concentration in leading areas -
Divergence, then convergence -between leading and lagging areas -
What's different for today's developers?
Deng Xiaoping, generally
seen as the
architect of China’s resurgence as
an economic superpower, insisted
on openness to world markets. He also insisted
on concerted development of the country’s
coastal areas, like Shanghai and Guangzhou,
as launching grounds for connecting to these
markets. When asked about the growing
wealth disparities between the coast and the
interior, he reportedly countered, “If all of
China is to become prosperous, some [areas]
must get rich before others.”
This chapter shows that all successful
developers support Deng’s insight. But his
wisdom may have eluded leaders in the
developing world, even the few lauded as
visionaries, as later chapters in the Report
will show. For decades, “spatially balanced
growth” has been a mantra of policy makers
in many developing countries.
Defining division - Economic concentration - Divergence, then
convergence - Geography, globalization, and development
Density and distance, the
of economic geography examined
in the two previous chapters, matter
for the development of countries and
regions. Over the past two centuries, global
gross domestic product (GDP) has grown
about 2.3 percent a year, an almost 50-fold
increase in constant dollars. But growth has
not been uniform. Half of global GDP today
is produced on just 1.5 percent of the world’s
land, which would fi t comfortably into Algeria.
This dense economic mass is home to
about a sixth of the world’s people.
High density reflects the self-reinforcing
benefits of proximity between economic
agents across spatial scales—local, regional,
and international. Distance also matters for
countries and world regions. For the past
50 years, by far the largest share of global
economic activity has been concentrated
in North America, Western Europe, and
Northeast Asia (see map 3.1). Being near
these largest markets for products and supplies
opens great opportunities. Indeed, the
correlation between access to markets and
economic growth is strong.
in motion: Overcoming Division in Western Europe
"The day will come when you France, you Russia,
you Germany, all you nations of the continent, without losing your
and your glorious individuality, you will merge into a superior unit,
and you will constitute European fraternity".
—Victor Hugo, from a speech at the 1849 International Peace Congress
Part Two: Shaping Economic
In the past generation,
there has been a slow revolution in economic thought, brought
about by the recognition of imperfectly competitive markets, due mainly
returns to scale, spillovers, and circular causation. A new way of
thinking has transformed
the classical analysis of industrial organization, economic growth, and
trade, and has delivered what were at first controversial, but now
implications for the progress of developing countries. Part two of the
the interplay between scale economies, factor mobility, and transport
costs to explain
the formidable forces that shape the spatial transformation described
in part one.
Chapters 4, 5, and 6 are the stops in a tour of the “engine room,” each
different facet of the interactions among agglomeration, migration, and
4: Scale Economies and Agglomeration
A guide to scale economies - A different realm - A portfolio of places
- Apprehension of market forces
This chapter summarizes
of entrepreneurs over the last two centuries
in exploiting economies of scale in production.
It focuses on “agglomeration economies,”
whose exploitation requires locating
in areas densely populated by other producers.
It next provides a brief synopsis of about
two decades of work by economists seeking
to understand these scale economies—
work that has diminished the disconnect
between research and the real world, and
that yields valuable policy insights. It then
assesses whether policy makers in the developing
world have been learning from this
experience a 126 nd analysis.
5: Factor Mobility and Migration
From mercantilism to globalization to autarky, and back again - Labour
mobility: learning from a generation of analysis - Practical policies
for managing migration
This chapter is about the
labor and capital, how their movements
help to concentrate economic activity, and
how these fl ows mitigate differences in welfare
that can accompany economic concentration.
It emphasizes movements of labor,
especially, for two reasons. First, although
many countries and regions are still thirsty
for investment, national reforms and international
agreements since the 1970s have
eliminated most restrictions on the fl ow of
capital. The scarcity of capital in some places
now has less to do with actual barriers and
more to do with unfavorable investment
In a globalizing economy capital
is mobile and will move quickly. Labor,
by contrast, tends to be less mobile for cultural
and linguistic reasons. Second, a strong
policy consensus supports the free fl ow of
capital for foreign direct investment, even if
this consensus is not always fully manifested
in the policies of the many countries where
external and internal obstacles remain.
Relative to capital, labor is subject to more
political restrictions and to explicit and
implicit barriers. Some novel insights come
from considering agglomeration economies
and human capital together. Based on these
insights, this chapter makes a case for facilitating
the voluntary movement of people.
6: Transport Costs and Specialization
What has happened: two centuries of experience - Transport costs and
scale economies: two decades of analysis - What to do: transport
policies in the developing world - Transport: an increasingly important
The sharpest insights
come from piecing together bits of
information that separately can be
innocuous and unsurprising. In the mid-
1970s overseas transport costs had fallen to
a fraction of what they were in 1900, thanks
to such inventions as steam power and the
telegraph. And the share of trade between
neighboring countries in Europe had risen
relative to their trade with countries more
distant. In 1910 British exports were spread
quite evenly between Europe (35 percent),
Asia (24 percent), and other regions (31
percent). By 1996, 60 percent of Britain’s
exports went to Europe and only 11 percent
Singly, neither fact is surprising.
Together, they are exactly the opposite of
what standard economics would predict.
After all, transport costs should be a larger
part of the cost of goods shipped from
half a world away than for goods traded
with neighbors. So a fall in transport costs
should have meant more trade with distant
partners than with neighbors, not less.
What had happened?
in motion: Distance and Division in East Asia
When Admiral Zheng He
brought a giraffe to Nanjing in 1415, it was believed to be a heavenly
beast, associated with great peace
and prosperity. It also marked the heyday of Chinese influence in East
Asia and the region’s wealth relative to the rest of the world.
China at the time was probably the world’s largest economy, enjoying
the highest standard of material, living with flourishing art
and education and advances in a range of technologies. Its naval skills
had enabled voyages to places as far away as Africa.
Part Three: Reframing the
Can crowded cities in
developing countries pull people in and power them out of poverty?
Does migration help those who move and those left behind? How can trade
world’s wealthy and most destitute? What can policy makers do to
address the three big
challenges facing the developing world—a billion slum dwellers, a
billion people living
in remote and underserved areas, and the “bottom billion”? Part three
of the Report
provides the answer: economic integration. How? By using spatially
spatially connective infrastructure, and spatially targeted incentives
and calibrating the
response to the diffi culty of integration. Chapter 7 explains what
means for metropolises, cities, towns, and villages. Chapter 8 proposes
between economically leading and lagging areas can benefi t everyone.
lays out the diffi cult steps needed to successfully integrate the
world’s most isolated
countries. In doing so, the chapters in part three revisit and reframe
debates on urbanization, territorial development, and international
7: Concentration without Congestion: Policies for an inclusive
Principles for managing a portfolio of places - A framework for
integration - The framework in action - A strategy for inclusive
A team of urban experts,
as part of
a routine exercise in 1974, forecast
the size of the world’s most populous
cities in 2000. Kinshasa, the Democratic
Republic of Congo’s capital, would grow to 9
million, more than London today. Pakistan’s
Karachi would expand to 16 million, almost
as large as New York City. The forecasts were
way off (see figure 7.1). Kinshasa’s population
is about half of London’s today, Karachi’s
about half of New York City’s. Why
were the experts, generally good at forecasting
national populations, so wrong in predicting
The reason: forecasting the spatial distribution
of people in a country is not the
same thing as predicting the size of its
population. As shown in earlier chapters,
spatial transformations—the growth of
cities and leading areas—are linked closely
to changes in the economy, especially the
sectoral transformations that accompany
growth and the opening of an economy to
foreign trade and investment. So predicting
the size of a city is economic forecasting,
a hazardous occupation.
8: Unity, Not Uniformity: Effective approaches to territorial
People seek opportunities - Countries seek unity - A policy framework
for integrating lagging and leading areas - The framework for action -
Avoiding Balkanisation: the political benefits of economic integration
may rearrange production within
countries, leaving people concentrated
in places no longer favored by markets.
In Brazil, China, India, and the Russian
Federation, changes in both markets and
policies over the last century have altered the
fortunes of places. Geographic differences
in economic activities encourage migration
from lagging areas, concentrating people—
including the poor—in leading areas. But
geographic unevenness in living standards,
by creating or deepening divisions within
countries, can also lead to confl ict, slowing
social and economic development.
Building on the fi ndings and analysis in
earlier chapters, this chapter discusses the
policy responses to widening or persistent
differences in living standards between
areas of a country that markets favor with
greater economic mass and those that they
do not. As in the rest of this report, the term
“area” is synonymous with a subnational
region or territory, so this chapter deals with
the “regional development” (also referred
to as the “territorial development”) debate.
Logic and experience indicate that policy
makers should calibrate their responses to
the severity of the challenge.
9: Winners without Borders: Integrating poor countries with world
Regional integration to scale up supply, global integration to scale up
demand - Building integrated neighborhoods: a framework - The framework
Many leaders in Africa
called for a
political union of the continent
at the time of independence.
Félix Houphouët-Boigny, Côte d’Ivoire’s fi rst
president, was more pragmatic, promoting
a gradual increase in economic cooperation
with neighboring countries. He proposed
one of the fi rst regional economic agreements
in Africa, the “Conseil de l’Entente,”
backed by a solidarity fund provided mainly
by Côte d’Ivoire. The key elements of the
Entente were free trade and free movement
The preferred destination of migrants
was, naturally, Côte d’Ivoire. Its share of
foreigners increased from 5 percent in
1950 to 26 percent of its 16 million people
in 1998—making the country one of the
top dozen destinations for international
migrants in the world. Côte d’Ivoire benefi
ted as foreign workers contributed to
export-led growth in industry and agriculture.
Sending countries—especially Benin,
Burkina Faso, Niger, and Togo—benefi ted
from remittances and increased trade. The
political crisis triggered by a coup in 1999
affected the entire region. But Houphouët-
Boigny had vested his country’s neighbors
in its future, earning the nickname of “The
Sage of Africa.”
in motion: Density, Distance, and Division in Sub-Saharan Africa
In November 1884,
Chancellor Otto von Bismarck of Germany convened a meeting of 14
European colonial powers in Berlin. After
four centuries of competition and hostility, the time had come to
negotiate and settle territorial claims. Britain, France, Germany,
and Portugal were the main players; no Africans were invited. Four
months later, the borders of African countries had been charted
in a pattern still recognizable today (see map G4.1). Bismarck’s
disciplined solution remained until the end of World War I, when
the League of Nations confi scated Germany’s four colonies and gave
other colonizers the mandate of governing them. At independence
in the 1950s and 1960s, Sub-Saharan Africa had almost 50 countries,
many of them called “artifi cial states,” with borders
cutting across physical geographic features and partitioning ethnic
groups into more than one country
Table A1 Geography and
Table A2 Urbanization
Table A3 Territorial Development
Table A4 International integration
Table A5 Other indicators
Sources and definitions
World Development Indicators
Data sources and
Classification of economies and summary measures
Terminology and country coverage
Classification of economies by region and income, FY2009
Table 1 Key indicators of development
Table 2 Millenium Development Goals: eradicating poverty and improvingg
Table 3 Economic activity
Table 4 Trade, aid and finance
Table 5 Key indicators for other economies
Economic activity becomes increasingly
concentrated with development. As this happens, substantial disparities
in welfare can emerge between cities and their hinterland, between
leading and lagging areas within countries and, perhaps most
dramatically, between countries in different regions of the
world. The objective of the World Development Report (WDR) 2009 is
to identify and understand the interactions between geography, economic
activities, and living standards, and to draw the implications of these
interactions for public policy.
2009 will chart the changes that accompany development in the three
spatial dimensions: rising density, falling distance
and persisting division. The report will
identify the forces that influence the location of economic
development. The report will then assess public policies that can
facilitate the spatial transformations necessary to sustain economic
growth and reduce geographic disparities in welfare.
WDR will attempt to reframe three important policy debates: on
urbanization in developing countries; on territorial development
policies; and on the pros and cons of regional integration. The
report will propose that integration of markets should be the guiding
principle for designing policies and institutions that help developing
countries exploit the economic gains from concentration while ensuring
convergence of social welfare. Drawing lessons from the experience of
both developed and developing countries and recent advances in economic
thinking, the WDR will discuss promising approaches and
report will have three parts which will, respectively:
salient features and evolution of spatial distribution of economic
activities and social welfare in the developed and developing world,
using three spatial scales that progressively widen to include density,
distance, and division.
||Propose a framework
for identifying the drivers of these spatial transformations, focussing
on agglomeration economies, factor mobility, and trade costs.
||Assess the public
policies through which governments have, intentionally or otherwise,
shaped these disparities.
discussion draft of the report will be posted on this site in June
2008. The report will formally be launched in October 2008.
Places do well when they
promote transformations along the dimensions
of economic geography: higher densities as cities grow; shorter
distances as workers and businesses migrate closer to density; and
fewer divisions as nations lower their economic borders and enter
world markets to take advantage of scale and trade in specialized
products. World Development Report 2009 concludes that the
transformations along these three dimensions—density, distance, and
division—are essential for development and should be encouraged.
The conclusion is controversial. Slum-dwellers now number a billion,
but the rush to cities continues. A billion people live in lagging
developing nations, remote from globalization’s many benefits. And
and high mortality persist among the world’s “bottom billion,” trapped
without access to global markets, even as others grow more prosperous
and live ever longer lives. Concern for these three intersecting
comes with the prescription that growth must be spatially balanced.
This report has a different message: economic growth will be
To try to spread it out is to discourage it—to fight prosperity, not
poverty. But development can still be inclusive, even for people who
start their lives distant from dense economic activity. For growth to
rapid and shared, governments must promote economic integration,
the pivotal concept, as this report argues, in the policy debates on
urbanization, territorial development, and regional integration.
all three debates overemphasize place-based interventions.
Reshaping Economic Geography reframes these debates to include
all the instruments of integration—spatially blind institutions,
connective infrastructure, and spatially targeted interventions. By
calibrating the blend of these instruments, today’s developers can
reshape their economic geography. If they do this well, their growth
will still be unbalanced, but their development will be inclusive.
|World Development Report 2009
"Reshaping Economic Geography"
|Alva, M., and A. Behar. "
that contribute to (or detract from) successful outcomes in African
Behar, Alberto. "
growth effects: an annual panel data approach."
Brülhart, Marius. " An Account of Global Intra-Industry Trade, 1962-2006
This paper provides a comprehensive
description of intra-industry trade patterns and trends, using
data on more than 39 million bilateral trade flows. In 2006, 27 percent
of global trade was intraindustry
if measured at the finest (5-digit) level of statistical aggregation,
and 44 percent if
measured at a coarser (3-digit) level of statistical aggregation. The
observed steady growth in
global intra-industry trade since the early 1960s suggests a process of
convergence: economies are becoming more similar over time in terms of
compositions. In particular since the 1990s, this trend appears to be
driven to a significant extent
by the international fragmentation of vertical production chains.
Intra-industry trade is a high-income
and middle-income country phenomenon: African trade remains
overwhelmingly of the
inter-industry type. Moreover, the observed increase in intra-industry
trade was not accompanied
by a comparable increase in marginal intra-industry trade, suggesting
adjustment pressures remain potentially important.
Calì, Massimiliano. "
inequality and economic growth: Evidence from Indian states."
Clemens, Michael, C. Montenegro, and
L. Pritchett. "
Place Premium: Wage Differences for Identical Workers accross US Borders."
Coulibaly, Souleymane. "
the Complementarity of Regional and Global Trade."
Crafts, Nicholas. "
Growth in the Age of Regional Economic Integration: Convergence Big
Hewings, Geoffrey J.D., Edward Feser, and Ken Poole. "
Development Policies in the United States."
Hirotsugu, Uchida and Andrew Nelson. "
Index: Towards a New Measure of Urban Concentration."
Kilroy, Austin. " Intra-urban
spatial inequalities: cities as ‘urban regions."
Chapters 1, 4 and 7 explore the idea of cities as sites of economic concentration and density.
But a city is not a homogenous unit. This paper explores spatial inequalities within cities:
how they are generated, what characteristics they have, and—similarly to inter-country,
inter-territory and urban-rural inequalities—how these spatial inequalities become persistent
and self-perpetuating, embodying serious economic and social problems. This conceptual frame
views cities as agglomerations of ‘urban regions’—which exhibit significant spatial intra-urban
inequalities, and where trends towards equality are constrained predominantly by labour immobility
and land-use policies.
Kilroy Austin. "
role of cities in post-war economic recovery."
Kroehnert, S. and S. Vollmer. "
Have All The Young Women Gone?: Gender-Specific Migration from East to
Lall, Somik, Christopher Timmins, and Shouyue Yu. "
to Opportunity: Successful Integration or Bright Lights?"
Manners, P. and
A. Behar. "
in sub-Saharan Africa and opportunities for Low Income Countries."
Mayer, Thierry. "
Potential and Development: A background paper for the World Development
Claudio E., and Maximilian L. Hirn. "
New Disaggregated Set of Labor Market Indicators using Standardized
Household Surverys from Around the World."
Nelson, B. and
A. Behar. "
Resources, Growth and Spatially-Based Development: A View of The
the supply and reducing the cost of land for housing in urban areas in
low- and middle-income nations."
te Velde, Dirk William. " Regional integration, growth
This study aims to examine the circumstances under which
different types of regional integration leads to convergence and
growth, and how such integration could best be fostered. It will cover
regions across the world, but the empirics will focus on developing
country regions and Africa in particular.
This paper provides background information for the study which focuses
on the following aspects:
• Consider representative regions in Africa and other developing
country regions and review their achievements in terms of income
levels, trade, FDI and regional cooperation (intra and extra-regional);
• Examine whether regions experience higher/lower inter-country
disparities in living standards (divergence or convergence);
• Review the implementation of the common external tariff (CET),
especially in the context of the African customs unions; and
• Examine whether certain types of regions lead to better outcomes in
terms of growth and convergence
This background paper is structured as follows. Section 2 introduces
the regions covered in this research. Section 3 describes the
performance of regions on the basis of a number of variables. Section 4
discusses issues surrounding the implementation of the CET. Section 5
summarises key issues and findings in the debate on convergence and
divergence in regions. Section 6 suggests the next steps in this
Downfall of the Soviet Union: A Spatial Explanation."
Vollmer, Sebastian, Inmaculada Martínez-Zarzoso, Felicitas
Nowak-Lehmann D. and Nils-Hendrik Klann. "
Economic Partnership Agreements – Empirical Evidence for Sub-Saharan
" Intra-Urban Graphs."
|From UN Habitat