STATE OF THE WORLD'S CITIES 2012/2013 Prosperity

Chapter 2.1
Productivity and the
Prosperity of Cities
Enhancing urban productivity is clearly desirable, as it
improves competitiveness and, ultimately, the prosperity of
any city. More productive cities are able to increase output
with the same amounts of resources, generating additional
real income that can raise living standards through more
affordable goods and services. More specifically, the
extra income and municipal revenue generated through
productivity will enable any city to provide more, better
services, such as housing, education and health services,
social programmes and expanded infrastructure networks
to support both productive and leisure activities.
Urban productivity refers to the efficiency with which
a city transforms inputs into outputs. However, because
of limited data, gross domestic product (GDP) per capita
is commonly used as a proxy for urban productivity, with
a city’s GDP measuring
local production of
Raising urban goods and services and
POLICy productivity
the population serving
is not a goal in itself, but
a critical starting point
as a proxy for inputs
to provide residents with related to human capital.
decent income for their
However, it is important
basic needs and adequate to emphasize that, despite
living standards. its expediency, GDP
1
POLICy
Cities are naturally more productive than rural areas,
as they benefit from larger pools of labour and talent,
together with concentration efficiencies for both producers and
consumers, and a more fluid exchange of ideas and innovations. 2
36
per capita fails fully to reflect the complex dynamics
determining urban productivity.
RISING URBANIzATION AND INCREASING
PRODUCTIvITy
As countries become more urbanized, both urban
and national productivity will increase. As shown in
Figure 2.1.1, rising urbanization and per capita income
went hand in hand for the world as a whole over the
past five decades. While the share of urban populations
worldwide increased from 33 to 51 per cent between 1960
and 2010, per capita income increased by 152 per cent –
from USD 2,382 to USD 6,006 – over the same period. 4
However, as shown in Figure 2.1.2, the positive link
between urbanization and national productivity holds
mainly for high- and middle-income countries, signaling
healthy urbanization dynamics fueled by prosperous
cities acting as magnets for rural migration. Low-income
countries display a more mixed trend. While these countries
as a whole experienced a fast pace of urbanization from
1960 onward, GDP per
capita remained largely
unchanged, and even
In OECD
decreased, particularly FACT countries, the
between 1970 and the
GDP per capita is, on
year 2000. This would
average, 64 per cent
higher in towns and
suggest that, rather than
cities than in rural
being attracted by better
areas. Similarly, in
economic opportunities
European cities with
in urban areas (demand
populations over
pull’), rural migrants
one million, average
were only seeking refuge
GDP per capita is
25 per cent higher than
from famine, war or other
in the EU as a whole,
calamities in what is often and 40 per cent higher
referred to as ‘supply push‘ than that of their home
nations. 3
urbanization. 5