Abstract:
Abstract: Urbanization in Sub-Saharan Africa (SSA) is generally highlighted as a
puzzle that deviates from the stylized facts in the literature. Using data from a panel
of 29 urbanizing countries in SSA from 1985 to 2019, the study employs the twostep
system generalized methods of moments to investigate the effect of urbanization
on the Poverty Headcount ratio and Poverty Gap. The estimated urbanization
elasticities of poverty indicate that at growth rates, a 1 percentage point increase in
urbanization rate induces 0.04 and 0.05 (0.07 and 0.09) percentage points decrease
in the Poverty Headcount ratio and Poverty Gap in the short-run (long-run),
respectively. Similarly, at levels, a 1 percent increase in urbanization level induces
0.22 and 0.32 (0.60 and 0.68) percent decrease in the Poverty Headcount ratio and
Poverty Gap in the short-run (long-run), respectively. Consistently, these results
show stronger effect of urbanization on the depth of poverty relative to the incidence
of poverty. These findings reappraise the literature on the urbanization of
poverty in SSA as well as provide a nuanced understanding of the effect of urbanization
on the different class of poverty measures. Notwithstanding, the poverty
reduction potential of urbanization is not automatic and requires enormous
investment in public infrastructure to achieve.
