Vernon Henderson2013-12-192013-12-192002World Bank Research Observerhttps://hdl.handle.net/10986/16420The rapid urbanization in many developing countries over the past half century seems to have been accompanied by excessively high levels of concentration of the urban population in very large cities. Some degree of urban concentration may be desirable initially to reduce inter- and intraregional infrastructure expenditures. But in a mature system of cities, economic activity is more spread out. Standardized manufacturing production tends to be de-concentrated into smaller and medium-size metropolitan areas, whereas production in large metropolitan areas focuses on services, research and development, and non-standardized manufacturing. The costs of excessive concentration (traffic accidents, health costs from exposure to high levels of air and water pollution, and time lost to long commutes) stem from the large size of megacities and underdeveloped institutions and human resources for urban planning and management. Alleviating excessively high urban concentration requires investments in interregional transport and telecommunications to facilitate de-concentration of industry. It also requires fiscal de-concentration, so that interior cities can raise the fiscal resources and provide the services needed to compete with primate cities for industry and population.en-USCC BY-NC-ND 3.0 IGOACCESSIBILITYACCOUNTINGAGGLOMERATION ECONOMIESAIRAIR POLLUTIONARTERIAL ROADSAUTONOMYBANKING SERVICESBIG CITIESBOTTLENECKSBUSINESS SERVICESCAPITAL CITIESCAPITAL INVESTMENTCAPITAL INVESTMENTSCAPITAL MARKETSCENTRAL BUSINESS DISTRICTCENTRAL CITIESCITY SIZECIVIL SERVICECONGESTION COSTSCOST OF CAPITALCOST OF LIVINGCREDITWORTHINESSDECENTRALIZATIONDECONCENTRATIONECONOMETRIC EVIDENCEECONOMIC DEVELOPMENTECONOMICSECONOMIES OF SCALEELASTICITIESELASTICITYEMPLOYMENTEXPENDITURESEXTERNALITIESFINANCIAL MARKETSFINANCIAL SERVICESFISCAL AUTONOMYFISCAL CENTRALIZATIONFOOD PROCESSINGFREIGHTGOOD TRANSPORTHEALTH SERVICESHIGHWAYHIGHWAY CONSTRUCTIONHIGHWAYSHOUSINGINDUSTRIAL DEVELOPMENTINDUSTRIAL LOCATIONINDUSTRIAL OUTPUTINDUSTRIAL PARKSINDUSTRIALIZATIONINFRASTRUCTURE COSTSINFRASTRUCTURE INVESTMENTINSURANCEINTERGOVERNMENTAL TRANSFERSLABOR COSTSLABOR MARKETSLAND DEVELOPMENTLAND DEVELOPMENT PROCESSLAND MARKETSLAND USELARGE CITIESLOCAL GOVERNMENTLOCAL GOVERNMENTSMEGA CITIESMEGACITIESMETROPOLITAN AREASMETROPOLITAN DEVELOPMENT AUTHORITIESMIGRATIONMOTOR VEHICLESNEIGHBORHOODSNOISENOISE POLLUTIONPOOR AIR QUALITYPOPULATION GROWTHPRODUCTIVITYPROVISION OF SERVICESPUBLIC SERVICESPUBLIC WORKSQUALITY OF LIFEQUALITY OF URBAN LIFERAILRAIL TRANSITREVENUE SOURCESROADROAD QUALITYROADSSATELLITE TOWNSSECURITY SERVICESSERVICE CENTERSSERVICE PROVISIONSERVICE SECTORSEWAGESEWERAGESINKING FUNDSSUBURBAN AREASSUBURBSTAXTOLLTOLL ROADSTOWNSTRAFFICTRAFFIC ACCIDENTSTRAFFIC CONGESTIONTRANSPORTTRANSPORT COSTSTRANSPORT EQUIPMENTTRANSPORT INDUSTRIESTRANSPORT SERVICESTRUEURBANURBAN AGGLOMERATIONURBAN AREASURBAN BIASURBAN CENTERSURBAN CONCENTRATIONURBAN DEVELOPMENTURBAN ECONOMICSURBAN GROWTHURBAN INFRASTRUCTUREURBAN INSTITUTIONSURBAN LANDURBAN LIFEURBAN PLANNINGURBAN POPULATIONURBAN PUBLIC FINANCEURBAN RESIDENTSURBAN SPRAWLURBANIZATIONURBANIZATION PROCESSUTILITIESWAGESWASTE DISPOSALWATER POLLUTIONJournal ArticleWorld Bank10.1596/16420