Reshaping Reshaping Economic GeographyEconomic Geography

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

percent of Japan’s land area

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

residence in 2006; 8 million people changed states

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

thirds within the region

Three prosperous places

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Packing in Tokyo’s subways

Tokyo’s “trainpackers” crush commuters into metrorail carriages

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Economic density—why the Japanese agglomerate

Japan’s economic mass is concentrated in the Tokyo-Yokohama area

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In Belgium, too

The economic landscape is bumpy, even in a small, developed, Western European nation

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Going home in the US

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

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Economic distance—what Americans

reduce by migrating Economic mass is concentrated in a few parts of a big country

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The fruits of specialization

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

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Low economic divisions—what allows Europe to specialize

Thin borders in Europe, thick in Africa

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Made possible by common institutions

Growing institutional integration in Western Europe

Source: Dorrucci et. al. (2002, 2004)

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

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Three prospering places

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

density of Seoul, Shanghai, and Bogotá

• 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 a big part of GDP More than 25 percent of its trade is within Southeast Asia; more

than 50 percent if Northeast Asia is included

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Trainpackers needed

People die every day on Mumbai’s trains

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Why Mumbai attracts migrants

Economic density is high in and near Mumbai

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Going home in China

Guangzhou railway station during Chinese New Year, 2008

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Where Chinese workers migrate

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Specialization and trade in East Asia

Computer parts are made and assembled all over East Asia

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Exploiting economies of scale in East Asia, to access world markets

Vigorous trade flows in East Asia, anchored by China and Japan

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The result?The result? China, India and Southeast Asia can again be recognized on a map of the world’s economic geography

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Geographic transformations needed for progress

• Higher Densities Few countries have grown to high income

without large cities

• Shorter Distances Growth seldom comes without mobile people

• Fewer Divisions Growth seldom comes to a country that is

isolated from others

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WDR 2009 structure

The report can be read by part or by policy

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WDR 2009 messages

• Growth will be unbalanced—concentration is the rule– Trying to spread out economic production amounts to

fighting the forces of economic growth• Development can still be inclusive—convergence

is the objective– Persistent spatial disparities in basic living standards are

neither desirable nor inevitable• Geographic transformations are needed for

combining unbalanced growth with inclusive development—integration is the answer– Don’t focus narrowly on places that are not doing well, focus

instead on their economic interactions with places that are doing better

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Policy makers tend to focus on spatial targeting first, and foremost

The debates on urbanization, decentralization and globalization tend to focus narrowly on lagging places, and on targeted interventions

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Policy makers should use all instruments of integration

Common institutions and connective infrastructure are the most potent instruments for economic integration

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Geographic scales

The report examines policy issues at the local, national and international geographic scales

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Integration gets harder…

…. as urbanization advances, and more policy instruments are needed

Institutions to encourage density in Popayan, Colombia

Institutions and infrastructure to encourage density and reduce distance in Bucaramanga, Colombia

Institutions, infrastructure and interventions to encourage density, reduce distance, and lower divisions in Bogota

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Urban settlements provide different services

Human settlements do different things

Popayan, Colombia Bucaramanga, Colombia Bogota, Colombia

1. Towns facilitate internal scale economies2. Cities encourage localization economies3. Metropolises generate urbanization economies

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The importance of land markets

A simple framework for tailoring urbanization policies to the economic geography of places

Source: Aving,network

Seoul in the 1950s

Cheonggye river, and the biggest slum in Seoul

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Source: Aving,network

Seoul in the 1970s

A highway is built on the river, through and over the slums

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Source: Aving,network

Seoul in the 1980s

More infrastructure and new businesses next to Cheonggye-cheon, the slums were moved to other parts of the city

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Source:

Seoul in 2009

Cheonggyecheon in 2005: Mayor Lee Myungbak, the current president of South Korea, removed the highway and recovered the riverfront

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Territorial development policies—when lagging areas have high poverty rates,

but most poor are in leading areasA 1-D problem of national economic integration in China:

The dimension—economic distance; the instrument—institutions that unify

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Territorial development policies—when lagging areas have high

poverty rates and many of the poorA 2-D problem of national economic integration in Brazil:The dimensions—economic distance and misplaced population density; the instruments—institutions, and infrastructure to connect leading and lagging areas

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Territorial development policies—when lagging areas have high poverty rates and

many poor people, who face internal barriers A 3-D problem of national economic integration in India:Nationally, the dimensions—economic distances, misplaced densities, and domestic divisions; the instruments—institutions, infrastructure, and interventions that target

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The importance of mobility and migration

A simple framework for tailoring territorial development policies to the economic geography of places

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Migration—the equalizer of income levels, not economic mass

Massive movements from East to West Germany, and convergence of income

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Division impedes market access in the developing world

Borders are thicker in the developing world

Thick borders hurt small economies more

Borders are thicker in the Balkans

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Market access helps to classify the developing world’s neighborhoods

Market access depends both on geography and policies

Macedonians have good market access

Market access is better in the European Union

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Integrating with world markets is not the most difficult in the Balkans

Density, distance, and division can be used to characterize the difficulty of international integration for countries in different regions of the world

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The importance of having the same institutions as the EU

A simple framework for tailoring international integration policies to the economic geography of places

Economic density in Skopje appears to be impressive

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Economic density in the Balkans is low

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Economic density is relatively high in Moscow and Istanbul

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Moscow is unimpressive compared with cities in Germany and Japan

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The importance of integration with nearby EU markets

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Calibrating integration policies— “An I for a D”

A rule of thumb for tailoring policies to the economic geography of places

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Lessons for FYR Macedonia?

• Unleash the market forces that promote economic concentration

– Markets for land, labor and intermediate inputs

• Calibrate policies to economic geography to ensure inclusive development

– “Institutions” which unify, “Infrastructure” to connect “Interventions” that target

• Sharpen urban, territorial development, and international integration strategies

– Economic concentration, in and around Skopje– Mobile people, internally and internationally– Deep integration, with European Union

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• www.worldbank.org/wdr2009

• igill@worldbank.org • cgoh@worldbank.org• tpackard@worldbank.org• udeichmann@worldbank.org

For more information