Urban Planning and Economic Development

Various urban objects, such as residential buildings, roads, utility facilities, etc., have more than one function. On the one hand, they have a direct purpose (e.g. housing, safety, mobility, etc.). On the other hand, they also perform economic functions because they have a huge economic impact on the urban environment.

For example, residential buildings not only serve as houses but also generate economic value because they provide jobs for retailers and real estate agents. Such buildings are also associated with a number of expenses because local governments have to build the necessary infrastructure and to make sure that the residents have access to public services and schools. An increase in gross national product, income, jobs, and other positive effects of urban development, improve the overall quality of life and are easy to measure.

According to research by the World Bank, a more concentrated urban structure creates a better environment for effective economic growth, especially in areas with a low level of economic development. Researchers didn’t, however, find any direct relationship, and some experts point out the growing urban concentration in many developing countries that doesn’t seem to push economic growth. This article will focus on the key aspects of urban planning and its economic impact.

Urban Planning Economic Development

Types of Urban Objects

  • Commercial services and retail: Commercial services and retail are industries that have a great impact in terms of GDP and jobs. This impact, however, goes far beyond these industries, as services and retail require inputs from a number of other sectors, including transportation, finance, real estate, and marketing. Retail centers also create business opportunities for security companies. The most common problem is shoplifting, but such centers should also be protected from more serious security threats, such as terrorist attacks.
  • Residential objects: Residential areas provide citizens with housing, which is one of our basic needs. Besides, they also make communities more attractive to new businesses. Residential development has a direct economic impact, creating jobs for planning experts, designers, attorneys, marketers, etc. An indirect economic impact of residential areas includes the creation of the local jobs, taxes, and income generated by the inhabitants.
  • Office space: Office development also has a primary economic impact similar to that of the residential areas. The secondary impact of office development includes business opportunities for cleaning services, insurance, and security companies. Office space offers long-term economic benefits, creating local jobs and generating income and taxes.
  • Utility services: Energy, water, waste, and other utility services are crucial for the quality of life, and the production of utility goods has a direct impact on economic development. However, it also has an indirect negative impact on the urban environment, including habitat fragmentation, air pollution, land use, and noise and smell generation. In turn, these consequences of the production of utility goods also have a negative economic impact. Therefore, utilities are often located in remote areas.
  • Industry areas: Industry plays a crucial role in many developed countries, as it serves as a source of various economic activities, including the processing of raw materials and the manufacturing of goods. Therefore, industry areas are a crucial part of urban development projects.
  • Public services and facilities: Unlike many other urban developments, social facilities, civic, and open space increase in value with time. They also attract businesses and increase the property value of real estate and land. Obviously, such facilities also create numerous jobs.
  • Transportation: Transportation is crucial for an economy because it enables people to transport both material objects, such as manufactured products and natural resources, and knowledge or skills. Better accessibility to investors, employment, and markets are just a few economic benefits of efficient transportation systems.

Urban Planning in the Context of Economic Development

Cities come in all shapes and sizes. Given that urban planning has a direct impact on economic development, city shape is also important in the economic context. Cities can be more or less compact, and their shape has a direct impact on transportation, therefore influencing economic development in many ways. Compact cities are usually more suitable for short trips and allow for developing more cost-effective transportation systems. Therefore, compact urban geometries create a better environment for welfare and productivity.

Another important aspect is the urban concentration. Most experts agree that urban concentration produces numerous benefits, including a decrease in poverty and inequality. However, many studies devoted to the connection between urban concentration and such benefits only focus on specific regions. It turns out that the situation differs in developed and developing countries, as well as in cities with different numbers of inhabitants. Students who study economics should take it into account when writing their academic papers on the effects of urbanization. Thus, if you’re one of them, you may check out Online Writers Rating to get academic assistance from the  experts who have access to the most relevant sources.

Analyzing data from the United Nations, we can see that developing countries have more concentrated urban structures. Cities that have over 50,000 inhabitants and over 100,000 inhabitants demonstrate the biggest difference, even though urban concentration has decreased in developing countries during the last 30 years. This decrease indicates a declining urban population. At the same time, the number of people living in cities increased twice from 1985 to 2010 in middle-income countries and tripled in the poorest countries.

The growing size of cities and an increase in urbanization rates made developing countries less concentrated. The decrease in concentration is most notable in Latin America, while most Asian countries demonstrate a stable growth of urban concentration.


Although the economic benefits of urban objects are obvious, it’s hard to establish a direct link between urban concentration and economic growth. On the one hand, urban objects from the list above create numerous jobs. On the other hand, economic development in certain cities not always reflects on the overall economic performance of the entire country. Sometimes, the disadvantages of urbanization, such as pollution and the emergence of slums, outweigh the benefits.

It’s also important to take into account city shapes, as they determine transportation opportunities. For example, cities located on peninsulas and islands often have irregular shapes, increasing the average distance between the main facilities. This factor is especially important in developing countries where many citizens cannot afford personal transport.

Nevertheless, the economic impact of urban planning is unquestionable. Even though it doesn’t necessarily change the overall economic situation in a country, it certainly stimulates economic development in cities.

Author Bio: Gregory is passionate about researching on new technologies in both mobile, web and WordPress. Gregory is in love with stories and facts, so Gregory always tries to get the best of both worlds.