Cities and productivity

There’s a new McKinsey Global Institute commentary piece titled ‘Inclusive cities are productive cities’ that argues that inclusiveness (including openness to migrants) is important to maximise the productivity gains of urbanisation. This has important ideas for Sri Lanka’s own urbanisation process via the Western Region Megapolis Project. In a previous article on this blog, I highlighted that the earlier urbanisation exercise was re-writing the DNA of entire communities, and we need to better manage the fallout and maximise the gains.

Some of the article’s commentary on openness to migration may appear more relevant to the European case right now, but it is quite relevant to Sri Lanka as well. Migration isn’t only about foreign nationals, but also about internal rural to urban migration, which is inevitable if the Western Region super-agglomeration takes off.

The opening paragraph captures it nicely,

Cities are productivity engines. They create productivity by enhancing the number and frequency of interactions. Higher population density equals higher frequency of interactions, and the more interactions there are, the more you can figure out what you’re good at and what you’re not. Then, we stop doing what’s not good, and we become better at the good. That’s specialization. That’s productivity. Doing that with as many people as you can creates the opportunity for growth.

During the January Sri Lanka Economic Forum organised by the Open Society Foundations and the Harvard Centre for International Development (CID), one of the CID’s scholars highlighted new research by them that showed that workers who moved to urban settings have higher returns to their skills and training than before they moved. This was largely due to the more dynamic interactions that are possible in urban contexts.  Further work by CID showed that mobility of workers helps diffusion of industries and overall economic diversification.

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