Urban Environments in Low-Income and Lower Middle-Income Countries: Policy Performance Indicators at the Subnational Level Prepared for the Millennium Challenge Corporation By Colin Christopher Rosina Estol-Peixoto Elizabeth Hartjes Angela Rampton Pamela Ritger Hilary Waukau May 18, 2012 Workshop in International Public Affairs ©2012 Board of Regents of the University of Wisconsin System All rights reserved. For additional copies: Publications Office La Follette School of Public Affairs 1225 Observatory Drive, Madison, WI 53706 www.lafollette.wisc.edu/publications/workshops.html [email protected] The Robert M. La Follette School of Public Affairs is a teaching and research department of the University of Wisconsin–Madison. The school takes no stand on policy issues; opinions expressed in these pages reflect the views of the authors. Table of Contents List of Tables and Figures .................................................................................. vii Foreword ............................................................................................................... ix Acknowledgments ................................................................................................ xi Executive Summary ........................................................................................... xiii Introduction ........................................................................................................... 1 I. What Do We Know About Economic Growth and Poverty in Urban Areas?..................................................................................................................... 3 A. Urbanization ................................................................................................... 3 Regional Urbanization Trends ............................................................................ 4 Consequences of Rapid Urbanization ............................................................. 4 The Importance of Cities ................................................................................. 4 Definition of Urban Areas .................................................................................. 5 Causes of Urban Growth ..................................................................................... 5 Natural Urban Population Growth ................................................................. 5 Rural-to-Urban Migration .............................................................................. 5 Reclassification of Areas................................................................................. 6 B. Urbanization and Economic Growth .............................................................. 6 Drivers of Economic Growth .............................................................................. 7 Manufacturing and Services ............................................................................... 7 C. The Problem: The Urbanization of Poverty ................................................... 8 The Urban Poor and Slums ................................................................................. 8 Urban Poverty ..................................................................................................... 8 Housing ......................................................................................................... 10 Electricity, Water, and Sanitation ................................................................. 11 Public Transportation ................................................................................... 13 Environmental Degradation and Sustainability ........................................... 14 Health ............................................................................................................ 16 Education ...................................................................................................... 18 Financial Services ......................................................................................... 19 Crime............................................................................................................. 20 iii II. Subnational Policies that Drive Economic Growth and Reduce Poverty in Developing Countries.......................................................................................... 22 A. Decentralization ........................................................................................... 22 B. Economic Policies ........................................................................................ 23 Investment Promotion ....................................................................................... 23 Participatory Budgeting .................................................................................... 25 Reducing the Informal Sector ........................................................................... 25 Municipal Solid Waste Management Systems ................................................. 25 C. Infrastructure Policies .................................................................................. 26 Land Tenure and Property Rights ..................................................................... 26 Housing ............................................................................................................. 28 Housing Finance ........................................................................................... 28 Participatory Slum Upgrading Programs .................................................... 29 Property Taxes .............................................................................................. 30 Water and Sanitation ......................................................................................... 31 Condominial Water Supply ........................................................................... 31 Communal Sanitation Provision ................................................................... 31 Public-Private Partnerships in Urban Infrastructure Provision .................. 32 Electricity and Non-governmental Organizations ............................................ 33 Public Transportation ........................................................................................ 33 Traffic Calming ............................................................................................. 35 Bicycle Infrastructure ................................................................................... 35 Bus Rapid Transit ......................................................................................... 36 Additional Considerations ............................................................................ 37 D. Human Capital Policies ................................................................................ 37 Public-Private Partnerships ............................................................................... 39 PPPs and Education ..................................................................................... 39 PPPs and Health ........................................................................................... 39 Targeted School Fee Reduction .................................................................... 39 Conditional Cash Transfer Programs .......................................................... 40 Technical and Vocational Education and Training ...................................... 41 Provision of Iron Supplements and Deworming Drugs in Schools .............. 41 Community-Based Health Insurance ............................................................ 42 Microfinance and Health Education ............................................................. 43 iv E. Financial Services ......................................................................................... 43 Collaboration and Usage of Pre-Existing Financial Networks ......................... 44 Life Insurance ................................................................................................... 45 Microcredit ........................................................................................................ 45 F. Corruption ..................................................................................................... 46 Types of Corruption .......................................................................................... 46 Corruption in Public Auctions ...................................................................... 46 Corruption in Police Forces ......................................................................... 47 G. Summary ...................................................................................................... 48 III. Policy Performance Indicators at the Subnational Level ......................... 50 A. Fiscal Decentralization Databases ............................................................... 50 B. Global City Indicator Facility ...................................................................... 51 Indicators .......................................................................................................... 51 Methodology ..................................................................................................... 53 Merits of GCIF .................................................................................................. 54 Drawbacks ........................................................................................................ 54 City Services ....................................................................................................