The Shape of Economic Growth

With more and more people moving to cities, the question arises how to organise urban expansion in a way that ensures economic growth and quality of life. Nina Harari discusses which urban configurations can best accommodate urban growth and whether a city’s shape influences its economic development.

The Importance of Shape

Urban planners have long advocated the virtues of “compact” cities – characterised by high-density and contiguous development – over “sprawled” ones featuring low density and scattered development. Sprawl has been associated with poorer access to services, longer commuting times, and fewer in-person interactions. This, in turn, may hold implications for pollution, social capital, and, ultimately, for economic development.

A less studied aspect of urban form is urban shape. Some cities are roughly circular, others are star-shaped, with development occurring along transit lines; yet other cities are constrained by geographic obstacles and take irregular shapes. Urban footprints with more “compact” shapes are characterised by shorter distances between points within a city. This definition of compactness – in contrast to the conventional one mentioned above – is unrelated to density. Rather, it is based on the outline of a city footprint.

Consider a circle. Its shape minimises the distance between points within a polygon. Now imagine that, while holding the area of the polygon constant, one tweaks this circle’s outline, thus generating a more irregular shape. As the geometry departs from that of a circle, becoming less and less compact, the average distance between points within the polygon will increase. The same can happen to cities as they expand over time.

This can have implications for transit and commuting, for patterns of firm and household location, and for the delivery of services such as electricity or water: if different parts of the city are far away from each other, it will be harder to move around the city and to deliver services to the various neighborhoods. Better accessibility within cities may positively affect both the quality of life of residents and the productivity of firms, fostering economic growth.

Shaping India’s Cities

India is a particularly interesting setting to test this assumption. The diverse patterns of urban physical expansion are apparent from night-time satellite imagery, where urban agglomerations are detectable as contiguous patches of light. Once the light footprints of urban areas are delineated, their “compactness” can be quantified through metrics based on the spatial distribution of points within the city footprint.

To shed light on the consequences of city shape, we can compare economic outcomes for cities that are comparable but developed different shapes.

For example, one can compare Kolkata, with its irregular, elongated shape, and Bengaluru, which roughly looks like a pentagon: if Kolkata had the same compact shape as Bengaluru, holding its area constant, average trips within the city would be shorter by 6.2 kilometres – a significant difference, given that the average commuting speed in the top cities in India is about 15 kilometres per hour.

For private households, data suggests that they are better off in compactly shaped cities and that compactness is perceived an urban amenity residents are paying for by high rents: All other factors being equal, cities with better shapes are characterised by higher rents net of wages. In concrete numbers this means that households give up 4 per cent of their income in exchange for a 360-metre reduction in within-city distance, equivalent to an 18-minute saving in daily round-trip commutes.

Poorer households, without access to individual means of transportation, are the ones that value city shape the most, as they find it harder to get around in cities with less compact layouts. Compact cities are thus also more inclusive in this regard.

For firms, city shape does not appear to make a difference in terms of productivity. Firms tend to cluster near each other both in compact and in non-compact cities, suggesting that they are able to leverage the benefits from proximity regardless of the overall layout of the city.

Getting in Shape

Over time, urban areas in India have not only expanded their footprint, but the larger cities have also deteriorated in shape, becoming less and less compact. This partly stems from more haphazard development in the largest and fastest-growing cities. What can policy makers do, if anything, to contrast deteriorating urban form?

One approach might be to revise regulations currently in place in Indian cities, as some of them may actually be contributing to deteriorating urban form. Vertical limits, a highly controversial regulatory tool, may contribute to deteriorating urban form, as they force cities to grow horizontally rather than vertically. Indeed, cities with more stringent vertical limits appear to be less compact, all else being equal.

Another approach would be to ease the regulatory constraints that discourage land consolidation within cities (such as the Urban Land Ceiling and Regulation Act). Beyond land use, there is also room to contrast the effects of bad shape, for example through investments in transit infrastructure.

Research is gathering more and more evidence on the important implications of urban form for the livelihoods of city dwellers. This calls policy makers to action: promote more compact urban layouts through land use regulations, promote better urban connectivity – and thus greatly ameliorate the quality of life for city dwellers in India and, potentially, across the developing world alike.

Mariaflavia Harari

Assistant Professor of Real Estate at Wharton School, University of Pennsylvania
Mariaflavia (Nina) Harari is an Assistant Professor of Real Estate at the Wharton School, University of Pennsylvania, specialising in urban economics and development economics. Her research agenda is centered on urbanisation in developing countries. Her current projects focus on urban structure in India and slums in Indonesia. She holds a PhD in economics from the Massachusetts Institute of Technology and a B.A. and a M.Sc. in Economics and Social Sciences from Bocconi University.
Mariaflavia Harari

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