Effects of Urbanization On Poverty

Among the effects of urbanization on poverty is the birth of slums, product of weak management policies, insufficient and unaffordable housing - Photo Credit: Wikipedia

According to the United Nations, over half of the population of developing countries will live in cities by 2020. This is perceived by many as a huge step forward, for developing countries and humanity in general. But is it? With urbanization slowly but steadily winning over rural settlements, theories about possible economic development have surfaced. In the backdrop, urban slums like those seen in El Cairo, Caracas, México City and Mumbai cloud the promising landscape.

As seen above, the possible effects of urbanization on poverty pose two strikingly different outcomes. With the United Nations and the global community vowing to halve the amount of people living in poverty by 2030, there is an inevitable question to ask:

Is urbanization the key to poverty alleviation or does it merely displace rural poverty for one of its own?


As defined by the Joint Urban Studies Center (2006), “in terms of a geographical place, urbanization means increased spatial scale and/or density of settlement and/or business and other activities in the area during a specific period of time”. Urbanization can occur because of natural population growth or due to migration of the population, namely from rural to urban settlements.

In any case, urbanization is “a key feature of economic development” (Viet Cuong, W/D). Both a cause and a consequence of development, urbanization leads to lower production costs and higher productivity due to the agglomeration of people in one place. Because urbanization is directly related to growth, it can also affect poverty. Let’s see how.


Sources: Does Urbanization Help Poverty Reduction In Rural Areas? Evidence from a Developing Country (Viet Cuon, W/D), Urbanization and Poverty Reduction: The Role of Rural Diversification and Secondary Towns (Christiaensen et al, 2013)

For the first time in history, over half of the world’s population lives in cities and most of the global economy is settled in urban areas. This does not come as a surprise, the positive relation between urbanization and economic growth make the former highly desirable.

However, as noted by the International Monetary Fund, “the process of urbanization has affected rural poverty more than urban poverty”.

Although urbanization greatly contributes to the alleviation of poverty in rural communities, the same is not true for urban areas - Photo Credit: Wikipedia

Urbanization directly affects rural poverty, as it generates new opportunities for rural workers, who shift out of agriculture and into more remunerative, non-farm activities in the city. This causes an influx of money into the rural areas, mainly in the shape of remittances. Furthermore, the migration of agriculture workers into the city reduces the rural labor supply, thereby increasing rural wages. But urbanization also entails indirect positive effects in rural communities. The rapid growth of cities also means an increase in the demand of agricultural goods and other products from rural areas, which fosters economic growth and alleviates poverty.

The effects of urbanization on poverty at the urban level are drastically different. As cities develop, dramatic increases in property prices are commonplace, which often displaces poorer city-dwellers who cannot afford to live in the area anymore.

Perhaps one of the most insidious effects of urbanization on poverty, the displacement of low-income city-dwellers from their communities is usually done through a process called gentrification.

Gentrification is the face of one of the most insidious effects of urbanization on poverty: displacement. Many low-income, native city-dwellers are pushed out when the rent prices in their communities rise due to their beautification by foreigners.


It is defined by the Joint Urban Studies Center as “the physical, social, economic, and cultural phenomenon whereby working-class or inner-city neighborhoods are converted into more affluent communities, resulting in increased property values and the outflow of poorer residents”. Gentrification encompasses the beautification of previously undesirable neighborhoods through the construction of new buildings and other amenities, such as supermarkets and restaurants. This hikes rents prices and draws out older residents, who are pushed again and again into undesirable areas. This and other problems like poor urban infrastructure, insufficient housing and weak city management causes the birth of slums.

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