Productivity and <strong>the</strong> Prosperity <strong>of</strong> CitiesTable 2.1.2City-specific factors determining a city’s productivityIntrinsic(natural)productivitygrowthfactorsExtrinsicproductivitygrowthfactorsEconomies <strong>of</strong> scaleProvision <strong>of</strong> urban servicesAgglomeration economiesMatchingSharingLearningTechnical efficiencyStructural efficiencyLand management policiesSpace efficiencyInfrastructure investmentTaxationDisaster preventionOperational efficiencyDay-to-day urban managementService deliveryEmergency managementInstitutional scaffoldingSound local institutions (e.g., decentralization)Sound governanceEase <strong>of</strong> doing businessQuality <strong>of</strong> life (quality <strong>of</strong> education, safety,cultural life, liveliness)Attractiveness to knowledge-base industriesAttraction and retention <strong>of</strong> <strong>the</strong> ‘creative class’Learning-based efficiencyCreativity and innovationResearch and development and technologicaldevelopmentEntrepreneurshipVisionLocal leadershipLocal governanceeconomies (Table 2.1.2). O<strong>the</strong>r city-specific factors dependon <strong>the</strong> city’s ability to capitalize on <strong>the</strong> natural productivitypotential <strong>of</strong> agglomeration economies (‘extrinsic cityspecificfactors’).Intrinsic city-level factors 15One <strong>of</strong> <strong>the</strong> most obvious factors determining urbanproductivity is population growth. As a city’s populationincreases, so does <strong>the</strong> pool <strong>of</strong> workers and consumers.Agglomeration economies are <strong>the</strong> benefits firms derivefrom locating near customers and suppliers in order toreduce transport and communication costs and havingaccess to a large labour pool. In larger <strong>cities</strong>, workersfactThe concentration <strong>of</strong> infrastructure, people as wellas economic, social and cultural activities, leads tosubstantial benefits and efficiency due to agglomeration and scaleeconomies.benefit from a wider range<strong>of</strong> potential employers,which lowers <strong>the</strong>ir risk <strong>of</strong>failure. Better matchingbetween labour supplyand demand results ingreater flexibility, higherproductivity and strongergrowth for both workersand businesses. Cities also<strong>of</strong>fer firms and residentsaccess to a wider and betterrange <strong>of</strong> shared servicesand infrastructure. 16Extrinsic city-levelfactorsAs <strong>cities</strong> continue togrow, higher productivitycomes to depend on o<strong>the</strong>rfactors, such as <strong>the</strong> ability<strong>of</strong> a city to maximize<strong>the</strong> technical efficiency<strong>of</strong> urban systems, bothstructural and operational.Effective management<strong>of</strong> agglomerationdiseconomies – includingcongestion and rising inputprices – enables <strong>the</strong> population and businesses to maximize<strong>the</strong>ir own productive potential.This has been <strong>the</strong> case in Mumbai, where seriousattempts to create an international financial hub havebeen defeated by chaotic local transport conditionstoge<strong>the</strong>r with a prohibitive property (rental) market, withfactpolicy Agglomerationeconomiesgive <strong>cities</strong> a competitiveadvantage over ruralareas, as well as large<strong>cities</strong> over smaller <strong>cities</strong>.Agglomeration economiesalso benefit denselypopulated areas within<strong>cities</strong>.policyThe structuralproductivity<strong>of</strong> <strong>cities</strong> in part rests uponan efficient supply <strong>of</strong>serviced land and reliableinfrastructure, includingtransport, power, waterand sanitation as will asICT. These are criticalenabling factors <strong>of</strong> urbandevelopment, as <strong>the</strong>yconstitute basic inputs <strong>of</strong>productive activity and,if deficient, constitutea limiting constrainton growth and privateinvestment.Lack <strong>of</strong> adequate infrastructure severely hinders <strong>the</strong>structural productivity <strong>of</strong> <strong>cities</strong>, limiting <strong>the</strong>ir capacity toachieve full potential.41
State <strong>of</strong> <strong>the</strong> World’s Cities <strong>2012</strong>/<strong>2013</strong>rents twice as high asThe soundManhattan’s pushing majorpolicy operation <strong>of</strong>financial companies away<strong>cities</strong>, which encompassesfrom <strong>the</strong> city.traffic to emergency17management, transportSeveral <strong>cities</strong> areservices, garbage collection, actively expandingand <strong>the</strong> provision <strong>of</strong> urban infrastructure as partservices that <strong>of</strong>fer critical <strong>of</strong> <strong>the</strong>ir developmentsupport to social andstrategies. Kenya’seconomic activities arecapital Nairobi isimportant determinants <strong>of</strong><strong>the</strong> operational productivitydeveloping transport<strong>of</strong> <strong>cities</strong>.and communicationsinfrastructure, withtangible results in terms <strong>of</strong>efficiency and productivityin various economic sectors. Similar efforts are underwayin Guadalajara in central Mexico in a bid to attract morehigh-technology firms (electronics and communications). Asa result, production structures are undergoing rapid change,and suburban landscapes with <strong>the</strong>m.For example, Rio de Janeiro’s newly establishedOperations Centre <strong>of</strong>fers a glimpse <strong>of</strong> <strong>the</strong> way <strong>cities</strong> mightbe managed in <strong>the</strong> future. 18 Conceived as a city-widedecision-making mechanism for emergency situationsbased on real-time information, <strong>the</strong> centre integratesinformation from multiple departments and governmentagencies, Visual displays <strong>of</strong> data from various urbansystems, including surveillance cameras, toge<strong>the</strong>r withmaps, news updates, information about incidents andeven simulations, facilitate real-time monitoring andanalysis. Although initially designed for forecasting floodsand o<strong>the</strong>r emergencies, <strong>the</strong> Centre is also used for dayto-daymanagement <strong>of</strong> urban functions. Similar projectshave already been implemented in New York City and inGauteng (South Africa). 19With <strong>the</strong> decline <strong>of</strong> physical constraints on <strong>cities</strong> andcommunities as a result <strong>of</strong> technological progress in recentdecades, creativity and innovation have arguably becomemajor driving forces <strong>of</strong> productivity and economic growthin urban areas.Figure 2.1.5Factors hampering economic productivityCorruption/lack <strong>of</strong> good governanceCost <strong>of</strong> conducting businessWeak public institutionsper cent40Lack <strong>of</strong> appropriate knowledge & skills developmentDeficient infrastructurePoor access to information35302520151050Africa Asia LAC Arab States All regions42