Why Is Africa Urbanized But Poor? Evidence from Resource Booms in Ghana and Ivory Coast

Type Book
Title Why Is Africa Urbanized But Poor? Evidence from Resource Booms in Ghana and Ivory Coast
Author(s)
Publication (Day/Month/Year) 2011
Publisher Mimeograph. Paris School of Economics
URL http://federation.ens.fr/ydepot/semin/texte1112/JED2011WHY.pdf
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.

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