Paul Romer asks why rapid urbanization proved so successful in South Korea while proving so much less so in Brazil:
A recent analysis of by Rick Hanushek and Ludger Woessman points to the obvious factor that we should consider in any analysis of modern economic growth: education. The disappointing rate of growth in Brazil (and most other countries in Latin America) used to be a puzzle. When we used measures like years of school attainment, there didn’t seem to be any problem with the school systems in the region. But when Hanushek and Woessman looked at measures of what students actually learned instead of measures of seat-time like years of educational attainment, they found that schools in the region dramatically underperformed those in the rest of the world. The skills gap was so large that it could easily account for the region’s chronically poor growth performance.
The connection between education and urban opportunity is dramatically reinforced by the basic result that emerges from The Chosen Few, a wonderful recent history by Maristella Botticini and Zvi Eckstein. They show that urbanization and literacy reinforce each other. Literacy and numeracy became much more valuable when independent political and military developments lead to rapid urbanization. In the other direction, the demand for literacy and numeracy goes back down when a region de-urbanizes, again because of independent political and military developments.
In the jargon of economics, urbanization and education are complements. This suggests that countries will do fine if they follow S. Korea by investing both in skills and the urban infrastructure that lets those skills be used to their full potential. Countries could face trouble if, like Brazil, they fall short on providing for effective universal education and fail to adequately plan for the provision of the basic services — water, transport, security — required for successful urban development.
Romer’s basic recommendation — that we ought to invest in skills and urban infrastructure to improve the opportunity set of the next generation — is sound. And though I’m confident that Romer would disagree with me, this gives us another lens through which to view the U.S. immigration debate. The U.S. is a highly urbanized society, yet we are on the cusp of embracing a substantial increase in less-skilled immigration. In effect, we are seeing to it that a larger share of our workforce consists of individuals who, like Brazil’s urban migrants, did not benefit from effective universal education rather than individuals who, South Korea’s urban migrants, did benefit from high-quality school systems.