Urbanization and Externalities

This chapter provides an introduction to the book. Urbanization is considered as the engine of growth and development. The increasing complexity of urbanization seems to create additional desirable or undesirable impacts. Urbanization brings higher productivity because of its positive externalities and economies of scale. Rapid urbanization often leads to negative externalities such as the despoilment of the natural environment, the devaluation of property, and increase the incidence of disease outbreak, and occurrence of crimes. A number of studies have ascertained that externalities created by urbanization contribute to economic development of cities and their peripheral areas. However, the quality of urbanization is linked with the existence of negative externalities. There are some studies which have examined negative externalities with urbanization. The current and mostly noneconomic literature has mixed views regarding whether squatting is a problem or a solution to efficient urbanization. The conflicting literature consequently has not provided a useful conceptual framework to guide government policy. The solution is not straightforward and many conflicting statements about the squatter settlements are the results of lack of detailed microlevel analysis. The cumulative externalities of squatter settlements have created enormous challenges towards making cities environmentally healthy, socially inclusive and sustainable. To improve understanding of the issue with urban externalities, further research is necessary. The primary issue of this study is to quantify the negative externalities in terms of incidence, intensity, and cost of the households.