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From The World Bank Group Documents and Reports Archive
World Development Reports
World Development Report 2009
Spatial Disparities and Development Policy
Reshaping  Economic Geography
Published 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.

Table of Contents Cover - Contents - Foreword - Acknowledgments - Abbreviations - Data notes

Geography 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.


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 high income, 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 consideration of 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.

Place and Prosperity - The world is not flat - Markets Shape the economic landscape - Putting development in place

Navigating This Report

Nations do not develop by merely 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 “where.”

Scope - Terms - Structure

Geography 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 warmer south.

Part One: Seeing Development in 3-D

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 distance between prosperous areas and those left behind widens. And although rapid advances in transport and communication increasingly bind together geographically distant communities around the world and open new opportunities for exchange, political divisions that obstruct 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 these changes 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.

Chapter 1: Density

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 density - Economic concentration -the richer, the denser - Convergence -rural-urban and within cities - What's different for today's developers?

Chapter 2: Distance

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 distance - Economic concentration in leading areas - Divergence, then convergence -between leading and lagging areas - What's different for today's developers?

Chapter 3: Division

Density and distance, the dimensions 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.

Defining division - Economic concentration - Divergence, then convergence - Geography, globalization, and development

Geography 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 distinct qualities 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 Geography

In the past generation, there has been a slow revolution in economic thought, brought about by the recognition of imperfectly competitive markets, due mainly to increasing returns to scale, spillovers, and circular causation. A new way of thinking has transformed the classical analysis of industrial organization, economic growth, and international trade, and has delivered what were at first controversial, but now widely accepted, implications for the progress of developing countries. Part two of the Report illustrates 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 spotlighting a different facet of the interactions among agglomeration, migration, and specialization.

Chapter 4: Scale Economies and Agglomeration

This chapter summarizes the experience 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.

A guide to scale economies - A different realm - A portfolio of places - Apprehension of market forces

Chapter 5: Factor Mobility and Migration

This chapter is about the mobility of 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 conditions.
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.

From mercantilism to globalization to autarky, and back again - Labour mobility: learning from a generation of analysis - Practical policies for managing migration

Chapter 6: Transport Costs and Specialization

The sharpest insights sometimes 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 to Asia.
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?

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 sector

Geography 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 Policy Debates

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 help the 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 blind institutions, spatially connective infrastructure, and spatially targeted incentives and calibrating the response to the diffi culty of integration. Chapter 7 explains what economic integration means for metropolises, cities, towns, and villages. Chapter 8 proposes how integration between economically leading and lagging areas can benefi t everyone. Chapter 9 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 long-standing policy debates on urbanization, territorial development, and international integration.

Chapter 7: Concentration without Congestion: Policies for an inclusive urbanization

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 city sizes? 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.

Principles for managing a portfolio of places - A framework for integration - The framework in action - A strategy for inclusive urbanization

Chapter 8: Unity, Not Uniformity: Effective approaches to territorial development

Globalization and liberalization 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.

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

Chapter 9: Winners without Borders: Integrating poor countries with world markets

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 of people.
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.”

Regional integration to scale up supply, global integration to scale up demand - Building integrated neighborhoods: a framework - The framework in action

Geography 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

Bibliographical Note
Selected Indicators

Table A1 Geography and access
Table A2 Urbanization
Table A3 Territorial Development
Table A4 International integration
Table A5 Other indicators
Sources and definitions

Selected World Development Indicators

Data sources and methodology
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 lives
Table 3 Economic activity
Table 4 Trade, aid and finance
Table 5 Key indicators for other economies
Technical notes


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. 

WDR 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. 

The 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 interventions.  

The report will have three parts which will, respectively:

 1 Summarize the 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. 
 2 Propose a framework for identifying the drivers of these spatial transformations, focussing on agglomeration economies, factor mobility, and trade costs. 
 3 Assess the public policies through which governments have, intentionally or otherwise, shaped these disparities. 

A 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 areas of developing nations, remote from globalization’s many benefits. And poverty 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 billions often comes with the prescription that growth must be spatially balanced.
This report has a different message: economic growth will be unbalanced. 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 be 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. Instead, all three debates overemphasize place-based interventions.
Reshaping Economic Geography reframes these debates to include all the instruments of integration—spatially blind institutions, spatially 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.

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Background Papers

World Development Report 2009 "Reshaping Economic Geography"

Alva, M., and A. Behar. " Factors that contribute to (or detract from) successful outcomes in African Regional Agreements."

Behar, Alberto. " Neighbourhood 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 world-wide structural convergence: economies are becoming more similar over time in terms of their sectoral 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 that trade-induced adjustment pressures remain potentially important.

Calì, Massimiliano. " Urbanisation, inequality and economic growth: Evidence from Indian states."

Clemens, Michael, C. Montenegro, and L. Pritchett. " The Place Premium: Wage Differences for Identical Workers accross US Borders."

Coulibaly, Souleymane. " On the Complementarity of Regional and Global Trade."

Crafts, Nicholas. " European Growth in the Age of Regional Economic Integration: Convergence Big Time?"

Hewings, Geoffrey J.D., Edward Feser, and Ken Poole. " Spatial/Territorial Development Policies in the United States."

Hirotsugu, Uchida and Andrew Nelson. " Agglomeration 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. " The role of cities in post-war economic recovery."

Kroehnert, S. and S. Vollmer.  " Where Have All The Young Women Gone?: Gender-Specific Migration from East to West Germany."

Lall, Somik, Christopher Timmins, and Shouyue Yu. " Moving to Opportunity: Successful Integration or Bright Lights?" (Presentation)

Manners, P. and A. Behar. " Trade in sub-Saharan Africa and opportunities for Low Income Countries."

Mayer, Thierry. " Market Potential and Development: A background paper for the World Development Report."

Montenegro, Claudio E., and Maximilian L. Hirn. " A New Disaggregated Set of Labor Market Indicators using Standardized Household Surverys from Around the World."

Nelson, B. and A. Behar. " Natural Resources, Growth and Spatially-Based Development: A View of The Literature."

Satterthwhaite, David. " Expanding 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 and concentration

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 research.

Treyvish, Andrey. " The Downfall of the Soviet Union: A Spatial Explanation."

Vollmer, Sebastian, Inmaculada Martínez-Zarzoso, Felicitas Nowak-Lehmann D. and Nils-Hendrik Klann.  " EU-ACP Economic Partnership Agreements – Empirical Evidence for Sub-Saharan Africa."

" Intra-Urban Graphs." 

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