Research Series Issue 22 - Poverty reduction during the rural-urban transformation

This paper analyses the relation between urbanization and poverty reduction, by exploring the role of secondary towns, mega cities and rural non-agricultural sector in relation to poverty reduction.

Results provided by cross-country panel datasets show that:

i) an increase in population share in agriculture is associated with poverty reduction, once the longer-term poverty change or dynamic is taken into account;

ii) the rural non-agricultural sector is poverty-reducing, in some cases;

iii) increased population in mega-cities has no role in poverty reduction: in a few cases, the growth of population in mega-cities increases poverty.

In this respect, findings suggest that more emphasis should be placed on policies enhancing support to rural agricultural and non-agricultural sectors.