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Urban Economics: The Urbanization Process and its Effects Term Paper


The human society can generally be divided into urban and rural inhabitants. For centuries, the majority of the global population lived in rural settlements. However, this trend has been reversed in the last few centuries with more people joining urban settlements. In the last few decades, the world’s population has experienced a great transformation as the urbanization process has taken root.

The year 2007 was a tipping point when the global urban population became greater than the rural population. This made the world predominantly urban and this trend is expected to continue with the projections indicating that 60% of the world’s population will be living in urban settlements by the year 2030.

Considering the prevalence of urbanization in the modern world and the importance attached to this process, this paper will set out to discuss urbanization. It will begin by providing a historical overview of the process and trace out how urbanization has progressed over the centuries. The paper will then discuss some of the impacts that urbanization has had on society including economic effects, environmental effects, and social effects.

Urbanization: A Brief History

The size and number of urban settlements in the world have grown impressively over the last century. By definition, urbanization is referred to as “the process by which rural areas become urbanized because of economic development and industrialization”.1 Researchers indicate that urbanization is initiated when a society develops from the agricultural to the industrial sector.2

In addition to this, urbanization is also caused by the movement of people from rural areas to urban centers that are characterized by high industrialization and greater economic development. Urban areas are normally the centers of trade and commerce in the country. When compared to the rural areas, urban settlements have larger and denser populations.

The phenomena of urbanization can be traced back to many millenniums ago. Historians document that around 6,000 years ago, the earliest form of urban life emerged in the geographical region currently occupied by Iraq. These early urban settlements were built around areas where traders converged. Trade was therefore the key catalyst of urbanization.

The next major urban settlement took place in South America. Due to the significant agricultural conquest of the Mayans and their complex political organization, urban centers were able to develop. Advancements in Mayan building technology led to the implementation of architectural complexes.

Administrative and economic hubs were established at the epicenter of these complexes and clusters of residential houses were clustered around them. The Chinese built the first large urban settlements in the 13th century and they continued to do this over the following centuries.

Some of the major cities built by the Chinese such as Hangzhou and Chang’an were populated with over a million inhabitants making China home to the first large cities of the world.3 Due to the success of the Chinese cities, great dynasties were established and the Chinese civilization witnessed significant advancements.

Until the end of the eighteenth century, the bigger percentage of the global population lived in rural settlements. The urban population was scarce due to limited food supplies and poor transportation networks.

By 1850, the urban population was only 4% of the entire human population and there were only 110 cities in the whole world with a population above 100,000.4 Most of these cities were located in Europe, Asia, and the Americas. The growth of urbanization began earnestly during the nineteenth century.

The growth in the urbanization process was accompanied by a marked rise in the world’s population. People migrated in large numbers to the urban centers where they took up work in the industries.5 Europe and the United States experienced the greatest levels of urbanization starting from the mid nineteenth century.

By 1890, 20% of the European and American population could be found in urban settlements. The urbanization process in these regions became more intense during the twentieth century and by 1950, the urban population had surpassed 20% in Europe and the US.

Urbanization occurred significantly later in the developing world. While high levels of urbanization had been realized in Europe, the Americas, Asia and Australia by the year 1950, limited urbanization existed in South Asia, East Asia, and sub-Saharan Africa.

However, the rate of urbanization started to increase in the late 20th century and by the beginning of the 21st century, a significant portion of the developing world’s population lived in urban settlements.6 Presently, the developing world is experiencing the highest rate of urban growth.

Urbanization has led to the growth of large cities (with a population of over a million) and mega cities (with a population of over 10 million inhabitants). In the initial stages, urban cities were classified as those with over 100,000 inhabitants. However, the population of cities has exploded and today a city with 100,000 people is considered small.

The phenomenon of mega-cities has started to take root in all continents. London was the first megacity at around 1990 with a population of 10million.7 However, the number of megacities has increased and by 2005, there were 20 megacities with the majority of these being in developing nations, most notably China and India.

Effects of Urbanization

Urbanization has some significant consequences on the society. As has been noted from its definition, urbanization promotes development and it leads to increased population density as it promotes the movement of people from one geographical area to another. These occurrences have some significant impacts that can be classified as follows.

Economic Effects

The economy of a country is greatly influenced by the urbanization process. The correlation between urbanization and economic development can be seen from the fact that all developed nations exhibit high levels of urbanization. Reports indicate that highly industrialized countries such as the US, Germany and Britain have over 75% of their population living in urban areas.8

Urbanization has gained ground in modern society and it is expected to keep growing. Presently, rapid urbanization is mostly taking place in developing nations. High urbanization is seen as a tool for development and many nations have embarked on intensified urbanization projects. The United Nations reports that by the year 2008, over half the world’s population will be living in urban areas.

Urbanization encourages global trade by promoting specialization and mass production of goods. Pellow rightfully notes that modernity is almost universally equated with the degree to which a nation has succeeded in urbanizing itself and integrating its urban centers into the global economy.

Through novel technology, a country is able to produce goods that can be sold in the global market for a profit increasing the economic well being of the country. By producing goods that can be exported to other countries and creating a market for foreign products, urban centres promote international trade.

The influence that urbanization has on the global economy is evident from the fact that the top 600 urban centers in the world generate almost 60% of the whole world’s GDP.9

In addition to this, urbanization promotes trade by increasing the individual consumption level. Researchers agree that urban settlements command an increasingly dominant role in the global economy.10

These are the major centers of both production and consumption. People in urban centers purchase many goods and services due to their increased purchasing power and needs. The overall economy of the country is stimulated by the increased consumption encouraged by urbanization.

Urbanization increases the job opportunities for the population. This is achieved through the high level of diversification of commercial activities in the country encouraged by urbanization.11 While the rural economy is typically based on agriculture, the urban economy is based on a wide variety of industries and trade opportunities. Individuals are able to seek employment in the various avenues presented by urbanization

. In addition to the formal sector in the urban settlements, there are many informal jobs available. The informal sector, which springs up due to urbanization, plays an integral role in the economy of nations.

For many developing nations, the informal sector creates many jobs leading to lower unemployment rates. The role of the informal sector is especially prominent in developing nations where 33% to 50% of all output is generated by this sector.12

Environmental Effects

Urbanization has some significant impacts on the environment. While the impact of urbanization on the environment was not very dramatic, the recent rise of large and megacities has increased the environmental impact that urbanization brings about.

To begin with, urbanization has increased the rate at which natural resources are depleted.13 Building huge urban settlements requires more resources that sustaining a rural settlement. Resources such as timber, iron, and stones to name but a few have been exploited to build large cities.

Urbanization has had a negative effect on water resources. Huge water resources are required to operate cities. To provide for the enormous water needs of the urban settlements, groundwater has been exploited extensively. Groundwater is the main water source for use in industry, irrigation, and drinking for most urban settlements.14

This overuse of water has had a negative effect on the land above the water bearing aquifers. Land subsidence is one of the negative impacts of groundwater exploitation. This phenomenon refers to the lowering of the land surface due to the compacting of clay layers within an aquifer due to overexploitation of the water reserves.15 Land subsidence causes disruption of road surfaces and it leads to the development of cracks in buildings.

The over-exploitation of groundwater has also contributed to the destruction of wetlands and lakes. As more water is drawn from the ground, the level of infiltration of water from inland rivers, wetlands and lakes increases. This leads to a decline in surface water and wetlands are destroyed.

Urbanization has contributed to environmental pollution. The pollution has mostly occurred in regions where urbanization has occurred in an unplanned fashion.16 In these regions, open drains of raw and untreated sewerage are allowed to exist. Open untreated sewerage leads to air pollution as toxic gases are emitted by the decomposing waste. In addition to this, urbanization has led to the problem of garbage disposal.

In cities with poor urban planning and services, huge garbage dumps are set up in some parts of the city. These dumps lead to the degradation of the natural beauty and pollute the air.

Dumps also lead to a spread of diseases and pollute the groundwater as the liquid waste seeps into the ground. Some cities make use of mass incinerators to deal with their waste. However, incinerators produce harmful emissions that are released into the environment. Burning of waste therefore contributes to environmental degradation.17

Population Effects

A major issue brought about by urbanization is housing. Researchers admit that rapid urbanization leads to housing management problems since the existing houses are unable to meet the demands of the vast number of people moving into the cities.18

Rapid urbanization results in the concentration of people in small tracks of land. Due to rapid and unplanned urban growth, substandard housing and crowding is prevalent in many urban regions in the developing world. This densification negatively affects the poor who are forced to live in slums and shanties.

Slums have emerged as a common feature in urban settlements in all developing countries and some developed nations. Slums have non-standard and poor quality housing units and they mostly house the poor communities in the urban settlements. The infrastructure available in most slums is degenerative and there is a socially disorganized neighborhood.

The decline in rural development has been blamed on urbanization since this process has contributed to rural population decline. While the fertility rates in both urban and rural areas are equal, urban areas have witnessed an increase in population while rural areas have suffered from a decline.

The appeal of better employment prospects and access to health and education facilities has led to the increase in rural-urban migration in many nations.19 The youth have emigrated in large numbers from their rural homes to the urban centers. The rural areas have therefore suffered from under development since the individuals who would serve as the labor force for development have migrated to urban areas.

Social Effects

Urbanization has a marked impact on some of the major social amenities offered by the nation to its citizens. A study on urbanization and education noted that policy makers regard providing education in urban settlements as a pragmatic decision. This perception is based on a number of factors including the fact that urban areas exhibit higher levels of student enrollment in the country’s education system.

Governments are therefore more inclined to offer the best education in urban areas compared to rural areas since it is typically cheaper and more efficient to do so. The greater efficiency arises from the fact that a large portion of the urban population is able to pay for these social services. In this way, urban settlements become centers of learning and innovation is encouraged due to urbanization.

In addition to this, the government obtains higher returns from providing public services such as education to the urbanized settlements since the urban living provides greater reinforcement for better academic performance. As such, inhabitants of urban areas have better access to education and training facilities.

This leads to a greater intellectual and personal development for individuals in the urban settlements. The better access to education and training prompts some people to migrate from the rural to the urban areas.

Urbanization has had an effect on the concept of family and gender roles in society. The urbanization process has contributed to the decline of the traditional family concept. New types of households based on partnerships are emerging. Women in the urban areas are more likely to be engaged in the labor market.20

This participation of women in the labor market arises due to a number of reasons. To begin with, urbanization leads to better education opportunities for both genders. Women with a high level of education are likely to be engaged in the labor market.21 In addition to this, life in the urban settlements is relatively expensive. Families are therefore able to lead lives that are more comfortable if they have two breadwinners.

Urbanization has increased the health outcomes of individuals. The overall health, which comprises of an absence of disease and a presence of mental and social well-being in the individual, has increased dramatically because of urbanization.22

Urban settlements lead to the increase in the quality of life for a large segment of the population. Infectious diseases that are exacerbated by poor quality of life such as typhoid and tuberculosis have reduced drastically due to urbanization. However, urbanization has led to an increase in some non-communicable diseases. These diseases have become prevalent due to the lifestyles and behaviors adopted by people in urban settlements.23

Due to poor diets, lifestyle diseases such as obesity and high blood pressure are prevalent in urban areas. The high levels of pollution due to the presence of industries and many vehicles in urban areas have increased respiratory ailments such as asthma and bronchitis.

In addition to this, urban living can result in poorer mental health outcomes. People in the urban space are exposed to greater levels of mental stress at work and in the home setting. Due to a lack of a good social network, urban settlers are likely to succumb to depression and this will interfere with the individual’s ability to operate normally.24


It should be noted that Urbanization has occurred in a heterogeneous manner. Some cities have grown into highly efficient centers where innovation and development is abundant. In these model cities, opportunities for prosperities for millions of people have been presented with huge gains.

On the other hand, some cities have grown in rampant and unplanned manners leading to great inefficiencies. These cities are fragile in nature and present dangers especially for the poorest residents who lack proper housing and a stable means of livelihood.

From this paper, it is clear that the urbanization process has social as well as economic implications. While urbanization can be an effective tool of development, it can also lead to detrimental effects. Specifically, expansive and rapid urbanization can lead to poverty, poor quality of life, and environmental degradation.

While most developed nations have been able to manage the negative impacts and mitigate them significantly, a majority of the developing nations are struggling to deal with the impacts of urbanization.

The World Development Report asserts that rapid and unplanned urban growth is the source of most of the environmental hazards present in urban regions in the developing world.25 For this reason, urbanization is regarded as a serious global problem.

Policy makers all over the world have therefore been forced to recognize the negative impacts that unplanned urban development can bring about in their respective countries. As a result, many countries are investing more in urban planning in order to benefit from urbanization and avoid the negative impacts that this process leads to.

Modern cities in developed nations are developed with the environment in mind. Steps are taken to improve the health of the city’s air, water, and land resources. The urban settlements have a sustainability plan that incorporates environmental consciousness in the building of the cities.26 Such plans make recommendations on sustainable transportation, energy use, and economic development in the region.


This paper set out to discuss urbanization and its impacts on the world. It began by noting that the global urban population has risen from a mere 3% of the world population in the early 1800s to a significant 50% by the year 2007. The paper then traced the history of urbanization from the Arabs in the Middle East to the Chinese in Asia. It then proceeded to demonstrate the urbanization has a positive impact on the economy of the country.

The social outcomes of the population are also improved by urbanization as people have better access to amenities such as health and education. However, the paper has also illustrated that while urbanization acts as a force of great development on one hand, it exposes the population to numerous risks on the other.

It has recorded how urbanization leads to an intensified pressure on natural resources and negative impacts on the environment. Policy makers should take action to mitigate the negative effects of urbanization and ensure that the global community continues to benefit from this process.


Bengtson VL, ‘Beyond the Nuclear Family: The Increasing Importance of Multigenerational Bonds’, Journal of Marriage and Family, vol. 63, no. 1, 2001, pp.1-16.

Dociu M & Dunarintu A, ‘The Socio-Economic Impact of Urbanization’, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 2, no. 1, 2012, pp. 47-52.

Giffin J, Urbanization: Its Effects on Government and Society, Literary Licensing, LLC, London, 2012.

Heynen N & Kaika M, In the Nature of Cities Urban political ecology and the politics of urban metabolism, Routledge, NY, 2006.

Muggah R, Researching the Urban Dilemma: Urbanization, Poverty and Violence. IDRC, Quebec, 2012.

Pellow C, Transnational alliances and global politics New geographies of urban environmental justice struggles, Routledge, New York, 2006,

Peng X, Chen X & Cheng, Y, Urbanization and its consequences, UNESCO-EOLSS. New York, 2010.

Thomas, A, ‘Urbanization Before Cities: Lessons for Social Theory from the Evolution of Cities’, Social Sciences, vol. 18, no. 2, 2012, pp. 211-235.

Tolley G, , 2009. Web.

Vlahov D & Galea S, Urbanization, urbanicity and health, Academy of Medicine, Oxford University Press, New York, 2002.

Wagner L, Urbanization: 21st Century Issues and Challenges, Nova Publishers, Boston, 2008.

Webb B, Sustainability of Groundwater Resources and Its Indicators, International Association of Hydrological Sciences, Boston, 2006.

Yasin G, Sumaira S & Farhan F, ‘Rapid Urbanization as a Source of Social and Ecological Decay: A Case of Multan City, Pakistan’, Asian Social Science, vol. 8, no. 4, 2010, pp. 180-189.


1 X Peng, X Chen & Y Cheng, Urbanization and its consequences, UNESCO-EOLSS. New York, 2010, p.2.

2 L Wagner, Urbanization: 21st Century Issues and Challenges, Nova Publishers, Boston, 2008, p.30.

3 Ibid, p.3

4 Wagner, p.29.

5 A Thomas ‘Urbanization Before Cities: Lessons for Social Theory from the Evolution of Cities’, Social Sciences, Vol. 18, No. 2, 2012, p. 212

6 Wagner, p. 39.

7 Yasin et al., p.182.

8 Ibid, p. 213.

9 R Muggah, Researching the Urban Dilemma: Urbanization, Poverty and Violence, IDRC, Quebec, 2012, p.1.

10 Yasin et al., p. 181.

11 M Dociu & A Dunarintu, ‘The Socio-Economic Impact of Urbanization’, International Journal of Academic Research in Accounting, Finance and Management Sciences, Vol. 2, No. 1, 2012, p. 50.

12 X Peng et al., p.3.

13 M Dociu & A Dunarintu, p.49.

14 B Webb, Sustainability of Groundwater Resources and Its Indicators, International Association of Hydrological Sciences, Boston, 2006, p. 54

15 Ibid, p. 59

16 N Heynen & M Kaika, In the Nature of Cities Urban political ecology and the politics of urban metabolism, Routledge, NY, 2006, p.43.

17 Ibid, p.44.

18 G Tolley, p.1.

19 Yasin et al., p. 183.

20 M Dociu M & A Dunarintu, p. 50.

21 Ibid, p.51.

22 D Vlahov & S Galea, Urbanization, urbanicity and health, Academy of Medicine, Oxford University Press, NY, 2002, p.24.

23 Ibid, p. 29.

24 V Bengtson, ‘Beyond the Nuclear Family: The Increasing Importance of Multigenerational Bonds’, Journal of Marriage and Family, Vol. 63, No. 1, 2001, p. 5.

25 G Yasin, et al., p.182.

26 N Heynen & M Kaika p.52.

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IvyPanda. (2019) 'Urban Economics: The Urbanization Process and its Effects'. 8 July.

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