In Search of a Spatial Equilibrium in the Developing World

In most developing countries, there is a large gap in average consumption per capita between urban and rural areas. One appealing interpretation of this gap is that it reflects a spatial equilibrium, in which the higher consumption levels of urban areas are offset by lower non-monetary amenities. In this paper, we draw on new high-resolution evidence to document how non-monetary amenities vary across space within 20 developing countries. We focus on measures of health, public goods, crime and pollution. These vary substantially across locations within countries and can be carefully measured with highly comparable data. We find that in almost all countries, and for almost all measures, the quality of these amenities is non-decreasing in population density. In addition, net internal migration flows are directed toward denser areas in every country. These findings are hard to reconcile with a spatial equilibrium. Instead, they suggest that developing countries are undergoing a reallocation of workers to densely populated areas, consistent with many models of structural change but inconsistent with models that assume a simple static spatial equilibrium