We find that one-quarter of the world’s consumption poor live in urban areas and that the proportion has been rising over time. By fostering economic growth, urbanization helped reduce absolute poverty in the aggregate but did little for urban poverty. Over 1993-2002, the count of the “$1 a day” poor fell by 150 million in rural areas but rose by 50 million in urban areas. The poor have been urbanizing even more rapidly than the population as a whole. There are marked regional differences: Latin America has the most urbanized poverty problem, East Asia has the least; there has been a “ruralization” of poverty in Eastern Europe and Central Asia; in marked contrast to other regions, Africa’s urbanization process has not been associated with falling overall poverty. Looking forward, the recent pace of urbanization and current forecasts for urban population growth imply that a majority of the world’s poor will still live in rural areas for many decades to come.

There is a seemingly widely-held perception that poverty is urbanizing rapidly in the developing world; indeed, some observers believe that poverty is now mainly an urban problem. In an early expression of this view, the distinguished scientific journalist and publisher Gerard Piel told an international conference in 1996 that “The world’s poor once huddled largely in rural areas. In the modern world they have gravitated to the cities.” (Piel, 1997, p.58). This “urbanization of poverty” — by which we mean a rising share of the poor living in urban areas — has been viewed in very different ways by different observers. To some it has been seen as a positive force in economic development, as economic activity shifts out of agriculture to more remunerative activities, while to others (including Piel) it has been viewed in a less positive light — a largely unwelcome forbearer of new poverty problems. This paper probes into the empirical roots of this debate — aiming to throw new light on the extent to which poverty is in fact urbanizing in the developing world and what role urbanization of the population has played in overall poverty reduction. We report our results in studying a new data set created for this paper, covering about 90 developing countries with observations over time for about 80% of them.