Agglomeration, Growth and Regional Equity: An Analysis of Agriculture- versus Urban-led Development in Uganda
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Traditional development models focus on the sector rather than location of growth. Advocates of agriculture-led strategies emphasise agriculture's strong growth linkages and potential to raise rural incomes. The new economic geography literature, however, provides theoretical support for urban industry-led development, which generates positive agglomeration effects of concentrating populations and economic activity. This debate is important for Sub-Saharan Africa, where agriculture dominates but where rapid urbanisation is occurring. We use an empirically calibrated economy-wide model with migration and agglomeration to estimate impacts of three investment strategies for Uganda-a fast growing country with wide rural-urban and regional disparities. First, our results indicate that a transport corridor connecting poorer northern regions to the rapidly growing south provides marginal benefits to northern households since northern producers are constrained by low productivity. Secondly, investing in southern urban centres to harness agglomeration effects accelerates national growth, but has little effect on other regions' welfare because of weak growth linkages and small migration effects. Finally, raising agricultural productivity, while less effective at stimulating national growth, generates broad-based welfare improvements. Thus, even after accounting for migration and agglomeration gains from urban-led development, improving agricultural productivity remains crucial for significantly reducing poverty and promoting regional equity in Uganda.
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