Urban Poverty

• Author: Martin Ravallion
• Position: Director, Development Research Group, World Bank
• Pages: 15-17

Are poor people gravitating to towns and cities? Yes, but maybe not quickly enough

Page 15

THE DEVELOPING world is becoming more urban. Some observers see this as the unwelcome precursor to new poverty problems, such as urban slums blossoming in congested cities. Yet others see it as a force for poverty reduction, as economies shift gradually out of agriculture to more remunerative activities, such as better-paid jobs in other sectors.

What does the evidence suggest? Is the weight of the world's enormous poverty problem, historically a predominantly rural phenomenon, shifting to urban areas? Is urbanization good or bad from the point of view of fighting poverty?

The data to help answer these questions have improved greatly over the past 20 years, thanks in large part to the efforts of national statistical agencies throughout the world, often with the support of the donor community and international development agencies. Today, one can find reasonably well-designed and well-executed household surveys for the majority of developing countries. Although many data problems still need to be ironed out, there has been an undeniable advance in our knowledge about poverty in the world.

At the World Bank, we have drawn on these household surveys and other sources to create a data set that aims to shed new light on the extent to which poverty is becoming an urban phenomenon in the developing world and on the role urbanization has played in reducing poverty overall. It draws on more than 200 household surveys for about 90 countries representing more than 90 percent of the population in the developing world (Ravallion, Chen, and Sangraula, 2007).

Our findings show that 75 percent of the developing world's poor still live in rural areas, although there are some marked regional differences. But the share of the poor living in urban areas is rising, and more rapidly than for the population as a whole. We believe that, by facilitating overall economic growth, population urbanization has helped reduce overall poverty-however, the process of urbanization has affected rural poverty more than urban poverty.

Measuring urban and rural poverty

Why is this new data set so important? For the first time, the Bank's international poverty counts (see box) have been broken down into their urban and rural components and account for the higher cost of living typically facing the urban poor. The best available source of data on the cost-of-living differences facing the poor appears to be the World Bank's country-specific poverty assessments, which have been done for more than 100 developing countries. These reports, a core element of the Bank's country-level analytic work, describe the extent of poverty and its causes in each country.

The new data set uses the international "$1 a day" line as the rural poverty line and then applies to survey-based distributions of consumption or income the country-specific estimates...