Poverty Reduction during the Rural-Urban Transformation: Rural Development is still more important than Urbanisation?

Abstract Based on cross-country datasets, we find that (i) development of the rural agricultural sector is the most poverty reducing; (ii) rural non-agricultural sector also is poverty reducing in some cases, but its magnitude is much smaller than that associated with the rural agricultural sector; and (iii) increased population in the mega cities has no role in poverty reduction. In fact, growth of population in mega cities is “poverty-increasing” in a few cases. Given that a rapid population growth or rural-urban migration is likely to increase poverty, more emphasis should be placed on policies that enhance support for rural agricultural sector and rural non-agricultural sector. If our analysis has any validity, serious doubts are raised about recent research emphasising the role of secondary towns or urbanisation as the main driver of extreme poverty reduction.