Abstract |
Africa is highly urbanized for its level of economic development. I argue that this paradox results from African countries exporting natural resources: resource windfalls drive urbanization, but not necessarily long-term economic growth. I develop a structural transformation model where the Engel curve implies that windfalls are disproportionately spent on urban goods and services. This drives urbanization through a rise of consumer cities. I illustrate the model by studying cocoa booms and urbanization at the district level in Ghana and Ivory Coast over one century. As an identification strategy, I use the fact that cocoa is produced by consuming the forest: (a) for agronomic reasons, farmers have to deforest a new region every 25 years, and (b) for historical reasons, the cocoa frontier has shifted westward in each country. I find that cities boom in newly producing regions, but persist in old ones despite the fact those regions are poor. I discuss possible explanation for both urban irreversibility and the lack of long-term economic growth. |