Budapest overwhelming sized city

Urban primacy: the case of Hungary in the twentieth century

by Robert Venyige 

One of the most important observations on the urban system of a country is that in lot of cases the size of a city is proportionate to its rank in the urban hierarchy. For example the second largest city has a population that is half of the largest city’s population, the third one has a population that is third of that of the largest one, and so on. This is called the rank size rule or Zipf’s law of city size distribution. However, in some cases the urban system does not follow this pattern, for instance the size of largest city is too small or too big. The second case is called urban primacy, when the largest city of a country represents disproportionately high share of the population and it has an extremely high economic importance.

One measure of the superiority of the largest city in a country is the so called primacy ratio. It is the ratio of the population of the largest city to the sum of the population of a bigger set of cities, like the five largest cities. (It is also possible to compare the size of the largest city to the total urban population.) One of the well-known example of urban primacy is the case of the United Kingdom, where London amounts to 70% of the population of the five largest cities. However it appears in countries with very different characteristics, for example France, Peru, Romania; but among the European countries, Hungary has one of the highest primacy ratio; 0.71 in. The capital of Hungary, Budapest indeed has a disproportionate size, its population (1.7 million in 2001) is approximately nine times larger than that of the second largest city, Debrecen.

What are the possible explanations for this unequal urban system?

There are different theories that may help us to understand the existence of this pattern in the case of Hungary. One of the possible explanation is historical; the change in the size of country after the World War I definitely affected its urban structure. The population of the country – that was the part of the Austro-Hungarian Monarchy at that time – was around 18 million, while after 1920 less than 8 million people lived inside the new borders. If we look at the Austro-Hungarian Monarchy, then Budapest was only the second largest city after Vienna in an Empire with more than 52 million citizens. While the urban system of the Monarchy was balanced (without primate city), if we consider only Hungary the urbanization was so concentrated that we can find the same primacy ratio as later on.

Furthermore political processes can also affect the urban system of a country. Autocratic countries tend to have larger primate cities due to the advantages their citizens can enjoy close to the center of the regime. Hungary, during most of its history in the twentieth century did not have democratic political system. The political regimes of the Interwar period and Communist system of 1949-1989 are considered autocracy or limited democracy and non-democratic, respectively. If we look at the primacy ratio of Budapest through the twentieth century we see that it remained fairly stable during this period, reaching its highest value around 1940 and the lowest in 2001. During the interval period the concentration increased, while after 1949 it started to decrease, but it is still high by international comparison. During the Communist regime one cannot attribute the changes in the urban systems to market forces. The state intensely got involved in the formation of the urban system, for instance by forced industrialization, establishing new cities or its partial restriction on labor mobility.

An economic explanation suggests that open countries (in terms of international trade) tend to have smaller primate cities.  While Hungary considered open in terms of its exports to GDP ratio, it does not necessary mean that it should have a more even urban population distribution. First, there is a high persistence in the urban structure of a country and it can change only gradually. In historical term, the economy of Hungary was closed under the 40 years of the Communist regime, even if in the last 20 years it has become an open economy. Second, if the primate city has a disproportionately better access to the export market (through for example higher accessibility, airport or highways) then an increase of the importance of trade can even aggravate the uneven structure. Still, as an effect of international trade, one can expect that the cities in the Western part of Hungary, which are closer to its main export partners may grow faster in the future compared to other cities in the country.

However one have to take into account that the definition of city is not straightforward and administrative borders can change, cities can merge or split. It is also misleading if we consider only the administrative boundaries of the city. As suburbanizatio has become more pronounced one should take into account its effect as well. While the population of Budapest itself is around 1.7 million, the size of its agglomeration is 2.4 million. The status of the capital as the primate city in this case is even more obvious (the primacy ratio is around 0.74), because suburbanization and the agglomeration processes are more advanced around the capital.

Source: Hungarian Statistical Office, KSH

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The Great City and the new city model

The Great City and the new city model 

by Popper Dávid

A new city is planned to be built from scratch in China. The main goal of the project would be an environmentally friendly city model that also ensures all the services of modern city life. This article examines the emerging questions related this project.

In October 2012, a lot of online press website has dealt with the news, that in China a new city is planned to be built from scratch. The project is named Great City and it aims to enable the popular city life, the environmental protection and being near-natural at the same time.

According to the proposal the city would be built in the middle of China, next to the city of Chengdu. Many refer the new town as a car-free city, because due to the plans, although cars won’t be forbidden, the residents won’t need it, since everything will be accessible in 15 minutes with environmentally friendly public transport and short distances. The bunch of greenery let people to be in the nature in two minutes from any part of the city.

The city will be built-up the way, that the location of the buildings will allow the most efficient usage of wind energy. Thanks to the environmentally friendly solutions the Great City will use 48% less energy and 59% less water and will produce 89% less garbage than other cities with similar density of population.

In a regional and urban development point of view not the environmentally friendly deserves attention but the questions which occurs from the case of a city built-up from scratch. The model is destined to be (one-to-one) applicable and can be built in elsewhere in China. So the question arises, if there might be such as functioning city model, which could be built anywhere in the world to provide a more environmental living. And if it exists, in which size could it be materialized? The Great City however has been plant as a town for 80000 people, so the infrastructure and the urban structure were evolved correspondingly.

As can be seen on the plan of the city, its structure is profoundly planned. Although it’s first of all environmentally friendly, basic conceptions of city planning can be detected. The farmland that can be used for agricultural activities is placed on the edge of the city. This area connects with the city centre through developed electric transport lines. In the city centre are concentrated all the services that an inhabitant could need: education, medical care, entertainment services etc. The residential area will be between the city centre and the rural land. This structure is in harmony with the consequences of the Von Thünen model.

The question emerges whether a system caused by human decisions made during a long period can be artificially planned. The procedure is in this case reverse than normally. So far the theories of city planning used hypotheses and models to explain the structure of existing cities. Now a whole new city is planned to be built from scratch using the theoretical and empirical results of former researches of city planning. Since there is a given structure of the city, the change of it in the future is slightly possible. The question will be that a city built based on models could fit to all the expectations of the inhabitants. This can be answered after the first years of the Great City.

If the Great City functions well, it could be considered whether this city model can be realised in greater size. Can we build an environmentally friendly city which ensures all the needed services and functions for one million inhabitants? Could be realised such a project with modern infrastructure so that it is still payable for the further inhabitants? Is there enough demand for it or is it just the game of some rich investors and enthusiastic designers?

As living near the nature and the protection of the environment are popular subjects nowadays, in my opinion there would be demand for such projects. But under such economic circumstances only the most privileged people could afford to start such investments. Because of the narrow supply the real estate prices would be very high in these new cities. As consequences of them I assume that this new city model won’t be used widespread in the following years, not even if the prototype is successful.

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Sex and the city

Sex and the city

by Péter Lukács 

Young women seem to outnumber men in the western cities lately. This phenomenon is controversial however, since cities require more skilled workers which could only explain the higher proportion of male inhabitants. One paper argues that attractive marriage markets appear to draw women into the cities.

Numbers prove that in the western world young women outnumber young man in urban areas. According to several studies cities offer better labor market for skilled workers then rural areas. It would then predict a surplus of young men in the cities, since we also know that in average man are more skilled than women. What explains the counterfactual balance of the sex-ratio then? What is so attractive in the cities for young women? One paper with the same title argues that it is the marriage market. But how?

According to the paper we can assume that men value characteristics associated with female fecundity which we could simply describe as young women. Since youth is a scarce “good” in the market, young women then tend to have a choice. If we also assume that women value financial security, richer men stand better chances. If rich men are located in urban areas indeed, that could explain the greater proportion of women.

We could then ask why marriage market doesn’t attract man and women symmetrically so that the sex ratio would balance. The paper answers this question by supposing that there is asymmetry in the marriage market and men pay women for marriage, meaning that men’s only way of achieving better chances in getting married is getting a high wage job, but women can chose between a high wage job career and a marriage as another income source. Thus such high paying areas (most likely cities) can support women more than men, since women have a choice between the income sources of a job or a man. 

Municipality sex ratio bye male average annual income, Sweden

Source: Edlund, L. (2005). Sex and the City. The Scandinavian Journal of Economics,107(1), pp.35.

The paper examines its assumptions on the date of Swedish municipality data. The hypothesis that young women match with rich men was a clear result. It also turned out that younger women are pricier indeed. However, there is also a merely plausible evidence that the male to female ratio is positively correlated with the women’s wages, in other words women are drown to areas with lower female income. The explanation is not obvious: when male incomes are low women tend to work more. Firstly, because in case of marriage the father’s low income must be made up and secondly, because in case of low male incomes, women are less likely to get married anyway so they rather concentrate on their wage income. Since it also turned out that municipalities with male surplus often have a low marriage rate it becomes clearer that this tendency cannot be explained by low availability of men but the low income of the men available.

But what does this really tell us about our world today? In cities, young women are attracted to rich man, whereas in rural areas they (comparing to cities) tend to choose working over marrying a lower income man. Clearly, money plays central role in our life, and no one can really be blamed for setting it high at the priorities, even when finding a partner. Financial insecurity might be many people’s nightmare. Many argues that extended families might not always stand behind us anymore when it’s about childbearing or that in this alienated word one cannot easily decide who is good for us, while the information about a man with high wage probably imply other good qualities other than richness. However, many people probably couldn’t accept this financial wellbeing as the main goal, especially not in the case of finding our love of life. They can only hope for other “positive” explanatory characteristics in these models which could outweigh the earning one.

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Make the history or “Just do it”

Make the history or “Just do it” © Nike 

by Jamila Mammadova

The agglomeration in Dubai is broadly discussed by many economists as an example of  rapid growth and successful policy implementation. Its development is unusual since Dubai  has a list of obstacles to the revolutionary development it achieved. Even though, the reasons are economically explainable, and bunch of literature is provided on the subject, we would like to re-consider the Dubai case in the frameworks of the new economic geography. The main argument we are supporting here is that artificial interventions and
planning in the geographical economy matter. The statement comes from the classic economic geography, which argues that history matters for the agglomeration. By the same logic, if the history matters, it can be corrected by policymakers in such a way that forces leading to agglomeration in the target destination are activated. The theory says, after certain level of economic cluster is reached, the decreased transaction costs for market players and beneficial market conditions create sort of spiral proliferation of the agglomeration.

Why the agglomeration in Dubai would not happen by itself? Firstly, Dubai is oil rich zone that has all preconditions to fall into the pitfall called “resource curse”. In fact, it happened with similar economies of Gulf States, like Oman or Qatar, which are rich countries, but are too reliant on the oil sale. Dubai could have historically ended up there, but in contrast, its economy is highly diversified, despite the fact that oil money played a high role in the initial investments. Secondly, the climate of Dubai would keep a great part of the travelers far from the city in hot periods. This could, in theory, lead to some tourism increases in winter and sleeping periods in summer. The mirror image of economic activities can be empirically demonstrated by Antalya or Bodrum, which are Turkey resort zones, and are frozen cities in cold times of the year. By the same token, there should be strong motivation to stay in the emirate during tremendously hot summer. Even though today summer life in Dubai allows closed-air skiing, thanks to the engineers and magic of the air
conditioning, the puzzle is in the achievement of the threshold that led to this development. The confusing part is how did they manage to make the first people invest, to bring FDIs to the country? Thirdly, religious and cultural background would never suggest that emirate can open up its economy and internationally integrate to the extent that it became one of the most popular tourist destinations in the world. 

In fact, it is not only tourism, which brings money to the economy, but also business and finance activities. The history of Dubai would never foresee it. Perhaps, it is because somebody stepped in and changed the road. In fact, the intervention to the development of the city took a long path. Even though Dubai was never poor before, it was definitely not on this scale of agglomeration. Interestingly, the first investments in the economy in the 60-s were made by Ruler Rashid bin Saeed Al Maktoum, who is perceived as the main driver of today’s expansion of Dubai. Thus, it is an individual and not a simple historical outcome that is treated as the favorable reason. Interestingly, the first investments in non-oil sector of the economy, infrastructure, were made even before oil money influx started, and were borrowing-grounded.

During two generations of rulers of Dubai, the aggressive investments in the various fields of economy were made, starting from the dredging of the Dubai Creek in order to allow larger ships to accost in Dubai. Later, the investments were made in the airport, hotels, aluminum and desalination plants, tourism promotion, trade promotion in form of festival arrangements, and, importantly, establishment of the free trade zones. All of these measures successfully brought the result, despite the fact that it took long time and large volume investments. As an award, today Dubai enjoys rich and stable economy thanks to its diversification and investments continuation. Nothing is black or white, and the debt accumulated for these investments is to be repaid by the government. Nevertheless, the city attracts business units as magnet given its developed market and, thus, low transaction costs, which ensures large money turnover. 

In the framework of our theory, all these measures taken by the rulers of Dubai represent artificial intervention in the history. The theory anticipated that once threshold is achieved, agglomeration would occur on the target geographical place. Indeed, what Dubai did, it practically managed to achieve this theoretical threshold.

The Dubai case should inspire the policymakers of other “oil embraced” countries to be not led by the history, but make it. Dubai does not have to invest so hard anymore, since the market players are clustering there and trying to amaze tourists, rich country citizens, and create more and more new services. Moreover, the high concentration of the firms provides Dubai with a luxury good: easy access to information, rapid modernization, and upto-date market. Indeed, Dubai has all possible international firms, restaurants, hotels, brands. And as one of those brands would suggest to the weaker countries, “Just do it”.

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Count István Széchenyi and the Chain Bridge

Count István Széchenyi and the Chain Bridge

by Luca Drucker

The construction Chain Bridge as the first permanent bridge between Pest and Buda caused

the reduction of transport costs and helped Pest-Buda become the kind of centre Count

Széchenyi dreamed of.

If we hear the name of Count István Széchenyi we can recall a bunch of reforms he made in the Hungary of Reform Era: the foundation of the Hungarian Academy of Sciences and the Trade Bank, the National Casino, the introduction of horse racing in Hungary, the Hungarian National Economic Association, the National Theatre... However, in the aspect of regional economics, his most important contributions as transport minister were the steam ships on Lake Balaton, his plans for the first railways in Hungary, his support of making Danube navigable and the Chain Bridge.

Before the construction of Chain Bridge, in the early 18th century Danube could only be crossed between Pest and Buda by ferryboat and from 1767 via a pontoon-bridge supported by 43 boats. However, this bridge hindered the circulation of ships and it was unusable in winter because of debacles. So we can say transport costs were very high between the two cities. The idea of building a permanent bridge between Pest and Buda was relevant, and thanks to Count Széchenyi, the work started in 1939 and the bridge was opened on 20 November, 1849. The bridge was built to connect the two cities he wanted to be unified in the future and be the political, economic and cultural centre of Hungary. 

By that time Pest was flourishing: population grew, centres of trade and money were built, palaces and hotels were raised and cultural life bloomed, too. However, we cannot say this was caused by a historical accident: people invested in Pest because they wanted it to blossom and be the centre of Hungary. 

But if we think about New Economic Geography theory, maybe we can say a little bit more about the consequences of building a bridge between Pest and Buda than just that it connected the two parts of the future capital city. 

This theory is about how people decide on location between two regions with two sectors of the economy. The two sectors are agriculture and manufacturing and manufacturing labour and firms can move between regions but agricultural labour can’t. Migration decisions of manufacturing workers are affected by the wage differences between the regions, but the equilibriums are determined mainly by transport costs. With high transport costs, spreading (production in both regions) and with lower transport costs, agglomeration (production in only one region) will be the equilibrium. 

If we take a look at how population in Pest and Buda formed among the years we can see that after the reforms in transportation, mainly the construction of Chain Bridge, population in Pest grew faster than that in Buda. It is true that the area of Buda is smaller and the first geography of the two cities is different – Buda is mostly built on hills but Pest is on a plain. This is why even in the 18th century people in Buda still dealt mostly with viticulture and wine production and with industry and trade in Pest. However, maybe with the huge decline in transport costs – the construction of the bridge – people did migrate from Buda and from other Western parts to Pest because of the higher wages and better possibilities, so some kind of agglomeration started. 

This is just my theory. It may not be true. Budapest is not exactly the textbook example of this model but it is sure that building the Chain Bridge eased the trade and transportation not only between Pest and Buda but between Eastern and Western parts of the country, too. This project, among the various reforms of Count Széchenyi and followed by even more reforms in the end of the century contributed to Budapest becoming the centre he dreamed of.

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Traffic Jams in Dar es Salaam city: Blowing away benefits of agglomeration

Traffic Jams in Dar es Salaam city: Blowing away benefits of agglomeration

By Elly Chuma

Dar es Salaam, the nucleus of Tanzanian economy, is the fastest growing city in East Africa. Prospect of good life beckons and attracts all classes and types of people in Tanzania; at the same time becomes the famous for traffic jams which are eating up the benefits of agglomeration economies.

Like other cities Dar es Salaam agglomeration is not an accident episode, since the city located on a natural harbour on the Indian Ocean which serves almost 90 percent of all imports. This harbour is the heart of the Tanzanian transportation system as all of the country's main railways Tanzania and Zambia Railway Authority (TAZARA) and Tanzania Railways Limited (TRL), and several highways originate in the city. Presence of more than 15 universities, good hospitals, schools has attracted many firms to locate their businesses in the city and workers to find jobs. Firms and workers locate in Dar es Salaam because this city offers a bunch of benefit, varying from product varieties, availability of workers, jobs, and so many amenities which are very difficult to get at low prices in other cities.

The city is the main engine of economic growth and serves as a major administrative, commercial, and industrial centre in Tanzania compared to other 29 regions. It is really surprising that this city contributes of 80 percent of the total GDP and home of one half of total manufacturing employees of the country. Dar es Salaam has invariably been an attractive, persuading centripetal centre, making its population one among of the most fast-growing in Africa. The city population has been double in last decades from 2.5 million in 2002 to approximately 5 million in 2012. The rural-urban migration into Dar es Salaam has involved different groups of people but young people are dominating. This group is looking for employment, with neither capital nor skills to undertake gainful business.

Transport problem in Dar es Salaam is a recent disease. Thanks to the government who did not make significant initiative to build new roads or rehabilitation of the existing ones. The fact that this city does not have rapid mass system, small buses do not offer enough services, consequently ownership of private cheap used cars especially from Japan has been increasing geometrically in Dar es Salaam and cause traffic jams more problematic

In past, commuters were able to move 30 kms only for 20 minutes which is quite difficult these days, now it takes more than 2 to 3 hours in the pick time. Minister of Works in 2011 lamented, "Dar es Salaam contributes nearly 80% of the national income, at the same time people are wasting a lot of time in the traffic jams. The latest study shows the jams cost the economy more than 4 billion Tanzanian shillings a day (equivalent to US dollar 2.5 million)."

“Do you want to be on time in your office”? Here is the deal; you have to wake up at 4:00 am to prepare yourself and make sure you get to the road around 5:00 am so that you can avoid traffic jams in the morning. Working hours starts from 7:30 am to 4:00 pm, but you have to wait until 8.00 pm when majority of people in the city center have already left. This is the innovative way used by some people to avoid using too much oil in the traffic jam.

Traffic jam in Dar es Salaam has influenced the location of the firms significantly. Traffic jam has increased cost of production for firms, and workers also are using a lot of time to commune and use a lot of oil in the queue. Some big companies like Heritage Insurance Company Limited, Tanzania Communications Regulatory Authority, and large cellular network companies (Airtel Tanzania Limited, Vodaphone Tanzania Limited), and Stanbic Bank Tanzania Limited have relocated to the periphery of the commercial capital to escape overhead costs caused by traffic jams, parking fees and other related problems.

It has been estimated by the Confederation of Tanzania Industries (CTI) that traffic jams costs up to 20 per cent of annual profits losses of most businesses in the city. Those companies that deal with the supply of fast moving consumer goods such as beverages, edible oil, bread and soap are the most affected since it is very hard to make timely deliveries of their products to customers.

Furthermore, traffic jam contributes to the increase level of crimes. Thieves used to walk along the cars’ queues and steal citizens’ belongs like handsets, jewelries. Also impatient drivers particularly dala dala drivers (famous public transport buses) in usually violate regulations cause killings of pedestrians. Traffic jam has led to significantly increase use of motorcycle (famous name boda boda) which has boomed the numbers of accidents in Tanzania killing hundreds of people.

The future of Dar es Salaam city is still uncertain, regardless of current attempt of government to curb this problem. Introducing train transport and a new plan to replace small buses with a government-managed rapid mass transit system are difficult to assess yet.

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Agglomeration in Dhaka: How does Read Made Garment (RMG) industry make Dhaka the fastest growing city of the world?

Agglomeration in Dhaka: How does Read Made Garment (RMG) industry make Dhaka the fastest growing city of the world?

by Md Masud Karim

In a sunny day of last summer, I was shopping with my German friend in one outlet of H&M in Budapest and suddenly she shouted “Oh My God! This T-shirt is too cheap! Masud, you see it is from your country”.  There is no doubt that the magical role of Ready Made Garment (RMG) industry in the agglomeration of Dhaka, the capital of Bangladesh, is more surprising.

Between 1990 to 2005, Dhaka, the fastest growing city on the earth, doubled in number- from 6 million to 12 million. According to United Nations, Dhaka which is the residence of 17 million people by 2011 will be the home of more than 20 million by 2025. It is well known that massive migration, high birth rate and new experience of free international trade are swelling cities in developing world; however, these factors are perhaps more strongly intense in Dhaka than anyplace in the world. Thanks to the concentrations of export oriented textile industry in Dhaka, which starts in 1980s and flourished in last thirty years, and thus created this massive agglomeration.

The RMG sector of Bangladesh has experienced a dramatic growth in last three decades. At present, Bangladesh ranks the third largest garment exporter after China and Turkey in the world. Before 1980, the country’s RMG industry’s role was mainly import substitution; hence, was not subject to export limit under the Multi-Fiber Arrangement (MFA). This opportunity did not escape the attention of Daewoo Corporations of South Korea, one of the largest RMG manufacturers losing from quota system. Without making delay, Daewoo teamed up with a Dhaka based new enterprise Desh Ltd. in 1979.

Knowledge and technological spillovers seems to be the first cause of RMG industry development in Dhaka. In 1979, Desh sent 130 new employees to Daewoo’s factory in South Korea, where they took part in an eight-month intensive training course on garments industry. Within few years, like employees of Silicon Valley companies who started their own business, most of these employees had left Desh and started their independent RMG business in Gazipur and Mirpur area of Dhaka. In retrospect, even though it was a great blow to Desh and Daweoo, it was boon for Bangladesh. In 1980, number of RMG factory was 47 which increased to 804 by 1990 and 5000 by 2011.

The contribution of government in the sustainable development of this sector is beyond question. In 1985, special benefit under MFA was withdrawn; however, the growth of RMG was thriving. At present, this sector accounts for 75% of countryexport and 25% of GDP. 

Figure: Number of garments factories in Bangladesh                        

Figure:     Employment (million workers)

Source: Bangladesh Garments Manufacturers and Exporters Association

Perhaps no other industry in the world contributed in agglomeration of a city like RMG has done to Dhaka city. As majority of RMG factories are set up in Dhaka city, it attracted unskilled and semi skilled labor from the whole country. At present this sector employs 3.6 million people of which 85% are woman.

This sector has created job opportunity not only for unskilled and semi-skilled but also for university graduates. Nowadays many universities in Dhaka city offer degree on textile. This makes it easier for the industry to recruit employees and at the same time employees have choice whom to work for.  

The concentration of the RMG industry in Dhaka has also induced the growth of other related business with close proximity to the RMG factories. Importers of raw materials and agent offices of foreign buyers find it advantageous to be close to production units. Consequently, it increases efficiency of this industry.

In comparison to other cities in Bangladesh, Dhaka has the largest high and middle income consumer base. Moreover, people in Bangladesh have a tendency to travel to the capital for shopping which also makes Dhaka more important local market. Even if foreign buyers cancel orders, garments owners still can have sound sleep as they know these garments can be sold in clothing markets of Dhaka like hot cake.

In the long run, garments industry in Dhaka likely to be hurt by high labor cost pushed by high living expenses, labor unrest which has become a common phenomenon; however, the wave of agglomeration this industry has created seems to be long-lasting. At present, out of 87 universities in the country, Dhaka city, which is one of 64 cities in Bangladesh, is the home of 52 universities. Moreover, the presence of all the urban amenities such as healthcare, theaters, and stadiums are also biased toward Dhaka.  These factors will continue to attract rich, educated people of the country, who are willing to pay extra living expenses to enjoy urban amenities.

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