World Development Report 2009 - IDFC · World Development Report 2009 Reshaping Economic Geography. June 28, 2008 Mumbai Consultation 2 Three special places •Tokyo—the biggest

World Development Report 2009

Reshaping Economic

Geography

June 28, 2008 Mumbai Consultation 2

Three special places

• Tokyo—the biggest city in the world– 35 million out of 120 million Japanese, packed into 4

percent of Japan’s land area

– Every day, its subways move 8 million people

• USA—the most mobile country– More than 35 million out of 300 million changed

residence in 2006

– Every year, 8 million people migrate between states

• West Europe—the most integrated continent– About 35 percent of its GDP is traded

– 60 percent of its trade is intra-regional—back and forth trade in all types of goods and services


Crowded cities

Tokyo’s trains have been moving 8 million people every day


Packing in the subways

Tokyo’s ―trainpackers‖ crush commuters into metrorail carriages


And piling up wealth—

the fruits of proximityJapan’s economic mass is concentrated in the Tokyo-Yokohama area


Going home for the

holidaysPlanes in the air on the Tuesday before Thanksgiving in the US


Going home for the

holidaysSome of the 35 million Thanksgiving travelers stuck in traffic jams


Going home for the

holidays?Stranded by storms before the Thanksgiving weekend


Why Americans put up

with the pain of movingEconomic mass is concentrated in a few parts of a big country


Specializing and trading

in Western Europe Airbus parts are made, moved, and assembled all over Western Europe

United States

engines

Great Britain

wings

Belgiumparts

Netherlands

parts

Germanybody

vertical stabilizer

France cockpitwheels

Toulouseassembly

Spain

horizontal stabilizer

FranceFrance

BelgiumBelgium G.B.G.B.

FranceFrance

SpainSpain

body GermanyGermany

body

wing

horizontal stabilizer

engine U.S.U.S.

vertical stabilizer

GermanyGermany


Loading and moving

Airbus parts are made, moved, and assembled all over Western Europe


Made possible by a

painful integrationSlow institutional integration in Western Europe during the last 50 years


The result?

The US, EU-15, and Japan cover much of the economic globe


Stories being repeated

now in developing Asia

• Mumbai—the most densely populated city– About 30,000 people per sq. km.; already twice the density of

Seoul, Shanghai, and Bogota

– More people keep coming

• China—the most mobile developing country– 60 million migrant workers traveled from home on the last day of

Chinese New Year holidays in 2006

– 200 million travelers were stranded due to snow storms days before Chinese New Year in 2008

• Southeast Asia—the most rapidly integrating developing region– Trade is big part of GDP

– More than 25 percent of its trade is within Southeast Asia; more than 50 percent if Northeast Asia is included


Stuffed trains in Mumbai

Mumbai’s trains move 6 million people every day


Trainpackers needed

People die every day on Mumbai’s trains


Going to work in China

Millions of Chinese workers migrated despite restrictions in the 1990s


Going home in China

Guangzhou railway station during Chinese New Year, 2008


Specialization and trade

in Southeast Asia Computer parts are made and assembled all over East Asia


The result?

China, Southeast Asia, and India can again be recognized on this map


Spatial transformations

needed for progress

• Higher Densities

– No country has grown to high income without urbanizing

• Shorter Distances

– Growth seldom comes without the need to move closer to density

• Fewer Divisions

– Growth seldom comes to a place that is isolated from others


Messages

• Growth will be unbalanced

– Trying to balance growth amounts to fighting it

• Development can still be inclusive

– Persistent spatial disparities in basic living

standards are neither desirable nor inevitable

• Integration is the way to get both unbalanced

growth and inclusive development

– Report attempts to change debates from spatial

targeting to spatial integration: institutions,

infrastructure, and incentives


Policy concerns

• Concentration of people in cities will outstrip

concentration of economic mass

– A billion people in the world‟s slums

• Spatial disparities in living standards will

widen as economic mass concentrates in places

distant from where people are

– A billion people in remote and lagging areas

• Poor people will be trapped in isolated

countries that are not developing

– The new „Third World‟: Collier‟s “Bottom Billion”


A billion in slums


A billion in remote areas


The “bottom billion”


Spatial scales


Report structure

Density : Rural-Urban -

Distance : Lagging-leading -

Division : Isolated-Connected

Scale economies : Agglomeration

Factor mobility : Migration

Transport costs: Specialization and trade

Territorial development

Regional integration Urbanization

1 2 3

4 5 6

7 8 9

Part Two:

Market Forces

Part Three:

Government Policies

Part One: Stylized Facts

Spatial Scale 1:

Area

Spatial Scale 3:

Region

Spatial Scale 2:

Country


Concentration of economic activity

rises, then levels off

The richer, the denser: People concentrate in towns and cities as nations develop

Agglomeration Index, using a spatial resolution of 1 square kilometer

0

0.2

0.4

0.6

0.8

1

0 5 10 15 20 25 30 35 40

GDP per capita (thousands, PPP, 2000 constant US$)

Agg

lom

erat

ion

Inde

x

EgyptKorea

Japan

Germany

USA

Norway

India

China

South Africa

Brazil

Botswana

Belize

Ethiopia




0

1

2

3

4

5

6

7

8

9

10

0 10000 20000 30000 40000per cap GDP (constant 2000 US$)

conc

entr

atio

n

Brazil,1960-2004 Japan,1900-2000

USA,1960-2000

Netherlands,1850-2006

Canada,1890-2006

France,1801-1999

Spain, 1850-2000

Chile,

1976-2004





Divergence, then convergence, in

rural-urban gaps


0

0.1

0.2

0.3

0.4

0.5

0.6

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

per capita GDP in constant intl Geary-Khamis dollar

spatial in

equality

(coeff

of

variation o

f re

gio

nal

wages o

r in

com

e)

UK,1871-1955

USA,1840-1960

Habsburg Empire,1756-1910

Japan, 1955-1983

Sweden,1920-1961

Spain, 1860-1975

Divergence, then convergence, but

only in growing countries


Divergence, then convergence, in

basic living standardsin Malaysia


Divergence, then convergence,

but only in growing regions

Convergence in East Asia, 1950-2006 (Coefficient of variation and per capita GDP growth)


Urbanization rates not unprecedented,

but city sizes are

Average size of largest 100 cities, 1800-2000


Market size is still important, but

globalization is unprecedented

Exports as a share of world trade, 1820-2000

1

6

12

26

0

5

10

15

20

25

30

1820 1900 1950 2000

Glo

bal

Tra

de a

s S

hare

of

Glo

bal

GD

P (

Perc

en

t)


Border restrictions have precedents, but

number of borders is unprecedented

Number of international borders, 1820-2000

75

104

200

600

0

100

200

300

400

500

600

700

1820 1900 1950 2000

Nu

mb

er

of

Bo

rde

rs


Drivers

The Drivers of Spatial Transformations

Spatial Scales

Local National International

Unit Area Country Region

Examples Guangdong (178,000 sq km) Rio de Janeiro State (44,000 sq km)

Lagos State (3,600 sq km)

Greater Cairo (86,000 sq km)

China (9.6 million sq km)

Brazil (8.5 million sq km)

Nigeria (933,000 sq km)

Egypt (995,000 sq km)

East Asia (15.9 million sq km) South America (17.8 million sq km)

West Africa (6.1 million sq km)

North Africa (6.0 million sq km)

Economic force Agglomeration Speeded by migration,

capital mobility, and

trade

Migration Influenced by

agglomeration and

specialization

Specialization/Trade Aided by agglomeration

and factor mobility

Key factor of

production

Land Immobile

Labor Mobile within countries

Intermediate inputs Mobile within and

between countries

Note: Throughout the report, areas are within-country economic neighborhoods or administrative units

such as states or provinces, and regions are groupings of countries based on geographic proximity.

Source: WDR Team.


Intra-industry trade

.1.2

.3.4

.5.6

GL, 3

-dig

it

1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006

Year

Primary Goods

Intermediate Goods

Final Goods


Intra-industry trade

0.630.62

0.440.21

0.560.47

0.20

0.540.53

0.400.26

0.410.32

0.130.02

0.340.30

0.120.04

0.250.14

0.160.06

0.230.15

0.080.02

0.140.11

0.170.03

0.080.04

0.020.02

0.070.05

0.020.00

0.060.03

0.010.01

0.03

0.020.04

0.030.05

0.020.01

0.020.03

0.010.01

0.030.03

0.00

0 .2 .4 .6GL index, 3-digit, intra-group trade

North America

Australia and New Zealand

Western Europe

Southeast Asia and Pacific

Northeast Asia

Eastern Europe and Russia

South America

Central America and Caribbean

Southern Asia

Western Asia

Eastern Africa

Central Asia, Caucasus and Turkey

Northern Africa

Middle Africa

Western Africa

Southern Africa

1962 1975 1990 2006


Dimensions

Density, distance, and division are the most important dimensions at the local, national, and

international scales, respectively

Spatial Scales

Local National International

Unit Area Country Region

Most important

dimension Density Of rural and urban

settlements

Distance Between lagging and

leading areas

Division Between isolated and

connected countries

Second-most

important dimension

Distance Due to congestion

Density Of population and poverty

in lagging areas

Distance To major world markets

Third-most important

dimension

Division

Between formal and

informal settlements

Division

Between areas within

countries

Density

Absence of large country in

region



Source: WDR Team.


Economic density

Production is concentrated in just a few places


Economic distance

Travel time in hours and days to the nearest city of 50,000 or more people

0 1 2 3 4 6 8 12 18 24 36 2d 3d 4d 5d

Distance to density can be great even in developed countries


Economic division

Borders are thickest in the poorest regions of the world


Policies

An ‘I’ for a ‘D’? An indicative matrix for calibrating the policy response

Complexity of

challenge

Place type—local (L), national (N),

and international (I)spatial scales

Policy priorities for

economic integration

Institutions Infrastructure Incentives

(Spatially

blind)

(Spatially

connective)

(Spatially

targeted)

One-

dimensional

L. Areas of incipient urbanization

N. Nations with sparse lagging areas

I. Regions close to world markets

Two-

dimensional

L. Areas of intermediate urbanization

N. Nations with dense lagging areas

I. Regions distant from world markets

Three-

dimensional

L. Areas of advanced urbanization that have

within-city divisions

N. Nations with dense lagging areas and

domestic divisions

I. Regions distant from markets with small

economies



Source: WDR Team.


1D—China: Lagging areas have

high poverty rates, but leading

areas have most of the poor


2D—Brazil: Lagging areas have

high poverty rates and many of

the poor

Brazil: Poverty rates are high in the North and Northeast, but most poor people live along the coast


3D—India, lagging areas have

high poverty rates and a big

share of the poor


Market access measures help to

classify regionsAccess to (domestic and foreign) markets differs greatly: Real market potential in 2003

Source: Mayer (2008) for this Report.

The 3Ds suggest a simple taxonomy of the world’s neighborhoods


What the report

proposes

1. Understand the spatial transformations necessary for progress• Higher Densities

• Shorter Distances

• Fewer Divisions

2. Unleash the market forces that promote concentration and convergence– Agglomeration

– Migration

– Specialization

3. Calibrate policies to achieve economic integration– “institutions” which unite—helping labor and capital move to opportunity

– “infrastructure” to connect—but do not expect production to spread out

– “incentives” that target—but only where necessary

4. Result:

– Unbalanced growth, inclusive development

Documents

World Development Report 2009 - IDFC · World Development Report 2009 Reshaping Economic Geography. June 28, 2008 Mumbai Consultation 2 Three special places •Tokyo—the biggest