Rising Inequality and Urbanization

Guanghua Wan

Director of Research

Asian Development Bank Institute

1. Inclusiveness

2. Implementation

3. Investment

3I’s of G20

Rising Inequality: Gini

0 0.1 0.2 0.3 0.4 0.5

Turkmenistan

Tajikistan

Taipei,China

Sri Lanka

Philippines

Pakistan

New Zealand

Mongolia

Lao PDR

Korea, Rep. of

Japan

Indonesia

India

Georgia

China, People's Rep. of

Australia

Asia and the Pacific

Latest

1990s

Both within- and between-Country Inequalities Rise

0.190.24

0.05

0.10

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

1996 2008

The

il In

dex

Within Between

0.34

0.24

Inclusive Growth or Solution?

• Transfer

• Jobs

• Social protection

• ….

Little effects so far

But how, who and where to start?

Analytical Work

National Inequality (3 parts)

=

Urban Inequality +

Rural Inequality +

Urban-rural Gap

T = Wr Tr + Wu Tu + Wr Ln(Wr + Wu

Yu/Yr) + Wu Ln(Wu + Wr Yr/Yu)

әT/әWu = （Tu - Tr）+

[(LnYr - LnYu）+（Yu-Yr）/Y]

Tu，Tr ，Yr，Yu

The Urbanization-Inequality Relation

Inequality Breakdown: China

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

19

78

19

79

19

80

19

81

19

82

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83

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84

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85

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86

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00

20

01

20

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20

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20

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20

06

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20

08

20

09

20

10

Within Between

Tackle the Urban-rural Gap: 2 Options

India: 32.7% urbanites with > 80% GDP

67.3% rural < 20% GDP

China: 55.6% urbanites with 90% GDP

44.4% rural 10% GDP

Fiscal transfer not feasible, given development status & competing demand for public exp.

The only solution: move people or urbanization

The Urbanization-Inequality Relation

Urbanization Impacts

on Inequality: China

…and the peak points

Urbanization is Good for

Reducing Inequality

15

20

25

30

35

40

45

50

19

78

19

79

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80

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81

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82

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10

Urb

Peak

Policy Implications

• Speed up urbanization is win-win:

growth + distribution

• The key is to control within-urban

inequality by helping the urban

poor and migrants

Urbanization-related Challenges

• Local and global pollution

• Vulnerability to disaster: flooding

• Rising urban crime

• Expansion of slum

• Growing inequalities

PM10 Standard Failure Rate: 67% Asian vs. 11% Non-Asian Cities

0

50

100

150

200

250

300

350

400

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PM

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Leve

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icro

gram

s/cu

bic

met

er)

Cities with PM10 above 100 ug/m3 (2008-2009)

Asia and the Pacific (34/57)Non-Asia and the Pacific

Source: WHO (2012).

97%

18%

0

10

20

30

40

50

60

70

80

90

100

Asia Non-Asia

Growth of Per Capita CO2 Emissions over 2000-2008 (%)

CO2 Emissions Grow Fast

Source: ADB estimates using World Bank (2012).

Further DegradationAsia’s Environmental Kuznets Curve

05

1015

CO

2 em

issi

ons

(ton

s/ca

pita

)

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000

GDP per capita (in 2005 PPP)

2010=$6,107 Peak=$40,9712010=$6,107 Peak=$40,971

Source: ADB estimates using World Bank (2012).

Vulnerability to Coastal Flooding

Urban

population

at Risk (million)

Share of

Population at Risk

(%)

Urban

Area at

Risk ('000 km2)

Share of

Area at Risk (%)

Africa 32 11 18 6

Asia and Pacific 251 18 129 11

Latin America 24 8 42 6

Europe 40 7 56 7

Risk of Coastal Flooding by Region, 2000

Source: ADB estimates based on McGranahan et al. 2007.

Vulnerability Rises with Urbanization

154 198

63

92 83

115

3

4

0

50

100

150

200

250

300

350

400

450

2010 2025

Po

pu

lati

on

at

Ris

k (m

illio

n)

East Asia South Asia

Coastal Flooding

410 M

303 M

141

192

63

91 33

46

8

11

0

50

100

150

200

250

300

350

400

2010 2025

East Asia South Asia

Inland Flooding

341 M

245 M

Source: Balk and Montgomery (2012).

Crime Rates Rise with Urbanization

0

500

1000

1500

2000

2500

3000

3500

4000

4500

0 10 20 30 40 50 60 70 80 90 100

Thef

t (R

ate

pe

r 1

00

,00

0 p

op

ula

tio

n)

Urbanization Level (%)

Theft Rate versus Level of Urbanization: Global Data

Over 60% of Slum Dwellers in Asia

Asia, 61%

Non-Asia, 39%

Shares of Global Slum Dwellers , 2010

Source: UN-HABITAT.

… and slum dwellers rise over timeAsian Slum Dwellers , 1990-2010

428.7

465.2

492.2

505.4 505.6

380

400

420

440

460

480

500

520

1990 1995 2000 2005 2010

Slu

m D

we

llers

(in

mill

ion

)

Source: UN-HABITAT.

ADBI Project on Urbanization

Can urbanization lead to better quality of life?

a. Crime: higher inequality or urbanization (or both) cause higher crime?

b. The environment

c. Poverty/inequality

d. and health …

=> Safe, green, inclusive and healthy urbanization

Thank You！gwan@adbi.org