After promoting women’s groups in West Bengal as a route to development a West Bengali woman asked Lant Pritchett:
You all are from countries that are much richer and doing much better than our country so your country’s women’s self-help groups must also be much better, tell us how women’s self-help groups work in your country.
Pritchett’s inability to answer the question led him to what I call Pritchett’s postulates of development, four criteria to decide whether factor X is an important determinant of development.
- More developed countries must have more X than less developed countries.
- The developed countries must have more X than when they were less developed.
- Recent development successes must have more X than development failures.
- Countries that are developing rapidly must have more rapid growth of X than those that are developing slowly.
Since more developed countries don’t have noticeably more women’s self-help groups, this idea fails Pritchett’s postulates. Indeed, so do many fashionable development ideas being tested by RCTs which is one reason why Pritchett’s postulates are controversial in the development community.
Paul Romer, however, (whose important blog post led me to Pritchett’s postulates) has a different approach. Instead of dismissing ideas that fail the Pritchett postulates let’s look for ideas that pass them.
Romer provides evidence that urbanization passes all of Pritchett’s postulates. I think he is correct and that suggests that policies to increase the rate of urbanization could have a very big payoff for development.
We are used to thinking about urbanization as a consequence of development but it is surely also a cause. Consider, for example, the micro evidence. It’s not that rich people move to cities, it’s poor people who move to cities to become rich. We also know that cities are engines of innovation.
We can have too much urbanization or too much in one place as when we get a bloated capital city. Nevertheless, it seems that we could speed the rate of urbanization by reducing the cost of urban development – both the obvious costs like improving land allocation in say India but also improving sanitation and air quality in order to lower the health costs of urbanization. Similarly, well planned, efficient, even beautiful cities increase the benefits of urbanization. Urbanization policy in general becomes growth policy.
How else can we increase the rate of urbanization in developing countries?