Urbanization without structural transformation: Evidence from consumption cities in Africa

Type Working Paper - George Washington University, Washington, DC. Processed
Title Urbanization without structural transformation: Evidence from consumption cities in Africa
Author(s)
Publication (Day/Month/Year) 2013
URL http://home.gwu.edu/~jedwab/JEDWAB_AfricanUrban_Feb2013.pdf
Abstract
Africa has recently experienced dramatic urbanization. Standard theories of structural transformation cannot explain this result, as it was not driven by a green revolution or an industrial revolution, but by natural resource exports. I explain how the Engel curve implies that resource windfalls are disproportionately spent on urban goods and services, which gives rise to "consumption cities". I illustrate this theory using both cross-country evidence and within-country evidence from Ivory Coast and Ghana using new data spanning one century and two identi- fication strategies (an instrumental variables strategy and a fixed effects approach). I find a strong causal effect of the production of cocoa, a ruralbased natural resource, on the growth of cities. I discuss the implications of urbanization without structural transformation for long-run growth.

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