Urban Economic Growth and Poverty Reduction

The Department for International Development has funded this research programme, which it hopes will be of value to policy makers and practitioners. The facts presented and the views expressed are those of the author, and do not necessarily represent the policies of DFID. 2 Summary This paper is concerned with exploring the relationship between urban economic growth and poverty reduction. Its core objective is to try to identify what room for manoeuvre municipal government has in terms of either facilitating a process of " trickle down " or mitigating the worst effects of economic decline on poor households. The first section considers the general debates on poverty to identify lessons for the municipal level. The importance of primary education and health, together with labour intensive growth, is confirmed. It is noted that the former are the responsibility of municipal governments and to some extent dependent upon central-local financial relations. It is also suggested that accountability is an important dimension in service delivery which the top-down macroeconomic literature often misses. The paper then moves on to review studies of urban economic growth and poverty, noting the importance of " flexibility " on the part of municipalities and the importance of infrastructure in urban development. The following section is concerned to unpack the mechanism through which growth is transmitted to the poor, the response of poor households, and the potential role of the municipality in both facilitating and ameliorating impacts. This is done across four dimensions of poverty (using Moser's recent work) defined by an asset/capital framework, namely income capital, human capital, social capital and productive capital. Overall, the municipality potentially has a far greater negative than positive role in the process. Thus, inappropriate planning-especially destroying jobs in the informal sector-and the lack of infrastructure and a lack of security are all very damaging to economic growth and to the poor. Furthermore, they serve to undermine the formation of social capital. This is very clear from evidence of these process from South Africa, Kenya, India and Ghana. However the municipality can also help the poor by providing its mandated services effectively, notably health, education and infrastructure; the failure to provide these hurts the poor significantly in terms of lost economic opportunities, constraints upon labour intensive growth and a decline in human capital. Planning and regulation policies are potentially important in facilitating the development of productive capital. The practice of traditional planning, by-laws …