DP12114 In Search of a Spatial Equilibrium in the Developing World

Author(s): Douglas Gollin, Martina Kirchberger, David Lagakos
Publication Date: June 2017
Keyword(s): amenities, Development, disamenities, living standards, migration, spatial equilibrium
JEL(s): O11, O15, O18, R12
Programme Areas: Development Economics, Macroeconomics and Growth
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12114

In most developing countries, there is a large gap in income per head between urban and rural areas. One appealing interpretation of this gap is that it reflects a spatial equilibrium, in which the higher incomes of urban areas are offset by lower non-monetary amenities. In this paper, we draw on new high-resolution evidence to document how amenities vary across space within twenty developing countries. We focus on measures of health, housing quality, crime and pollution. These vary substantially across space, and they can be carefully measured with highly comparable data. We find that in almost all countries, and for almost all measures, amenities are constant or increasing in population density. In addition, net internal migration flows are directed toward denser areas in every country. These findings are hard to reconcile with a spatial equilibrium. Instead, they suggest that developing countries are undergoing a reallocation of workers to densely populated areas, which offer higher living standards on average.