In an urban economy, there are two sorts of growth. First, economic growth can increase the average salary or per-capita income in a city, and second, job growth augments total workforce.
Economic growth is an increase in per-capita income, and the sources of economic growth are capital deepening, increases in human capital, technological progress, and agglomeration economies. The accumulation of high levels of human capital in a city leads on to regional economic dynamism in the guise of job growth and increases per capita income.
According to Storper & Scott (2009), “One of the most complex enigmas of contemporary social science concerns the causes of urban growth and associated spatial patterns of population movement. This enigma can be expressed in various ways, but one version in the literature is framed by the question: do people move to jobs or do jobs move to people?” Storper et al. (2009) found “Cities that can attract workers with high levels of human capital are said will grow with special rapidity because of the entrepreneurial, creative, and innovative energies that these workers carry with them.” The notion that interaction among individuals leads to positive growth effects are, consistent with the wider literature on information and knowledge spillovers in local labor markets. Storper & Scott (2009) stated:
Human capital figures as one of the central elements of modern economic growth theory. In the Romer–Lucas model, long-run growth is rendered possible by increasing adverts to scale, whose source is identified as knowledge. For its part, knowledge tends to grow indefinitely, for it can be endlessly re-used, is extremely leaky (and hence its circle of users continually expands), and can be combined and recombined in virtually unlimited ways. This endogenous growth theory raises the empirical dilemma of the conditions that enable knowledge to increase over time. One crucial line of explanation centers on the embodiment of knowledge in better educated, more productive people, and this is the human capital branch of growth theory most closely identified with Lucas (1988).
According to the research done by Fuchs (2012), in the last half of the twentieth century, public policy makers in both the developed and developing world averted their attention from many problems facing urban areas. The only way cities can handle the financial, environmental, and security challenges of the twenty-first century are with an understandable and fair governance structure that delivers effective public services.
Fuchs (2012) has found that a lack of public safety in cities can lead to civil unrest, political corruption, and authoritarian rule. How can cities meet these public-policy challenges? They cannot be remedied by unilateral decisions made in the private sector or civil society, particularly at the state, or national level. The most effective way to address these twenty-first-century challenges are by strengthening institutions of urban governance.
Higher levels of economic growth tend to sway to higher rates of production. Technological development because resources are used more efficiently as procedures reduce costs and innovate to keep pace with the rising demand for goods and services. Higher rates of economic growth, which results in job creation, and falling unemployment levels also lead to higher incomes for those earlier unemployed. An urban, economic growth can be achieved when sound, equally distributed public services are in the interest of the total city population. Funchs (2012) provided recommendations regarding city governments that move on the responsibility to demand accountability, fairness, and effective service delivery will achieve economic growth. Under a system, in which the needs and aspirations of citizens are connected to the government that can provide services. Leadership from city government, and especially mayors, is critical to the long term deliberating that is required for investment in infrastructure, economic growth, and environmental sustainability that will ensure any city's viability, eventually. Funchs (2012) stated:
Strong city governments are necessary because the primary focus of national governments invariably will be issuing national and international in scope. Even in representative democracies, national institutions are geographical aloof bureaucracies that tend to be insulated from the public and disconnected from the problems of service delivery in communities. Without an elucidate link between the representative or participatory institutions of government and the delivery of public services, it is difficult to ensure the legitimacy of government. If citizens cannot concatenate government to the lives of their communities in a positive way, it becomes difficult for them to accept the authority of government to protect their property, resolve conflicts, and collect taxes. City governments can add this substantial link. In a representative democracy, citizens will yield the fairness of a deliberate when they have been consulted and when elected officials are accountable to them.
Economic growth has significant effects on the environment, and environmental management is a vital economic, social, and political issue in many countries. Jain & Courvisanos (2009) found “Successful economic development of peripheral regional growth relied on transport infrastructure to improve the accessibility and competitiveness of the region.” Therefore, authors stated, “Transport infrastructure impacts on the economy by demand effects, including increased demand for goods and services in building, operating, and maintaining infrastructure; and supply affected in the provision of infrastructure.”
At the microeconomic level, a market allocation of resources solves the problem of scarcity in market economies. However, the price movement rarely allocates environmental effects in an optimal strategy because prices do not always reflect the favourable cost of using environmental resources. The question that arises with various environmental effects, usually common property; is the lack of well-defined property rights.
Partridge, Rickman, Ali, & Olfer (2008) stated, “The sources of urban agglomeration and the development of the urban planning have been studied extensively. Despite the pivotal role of the hinterlands in theories of the development of the urban system, little attention has been paid to the impact of urban agglomeration in a developed, mature economy on growth in the hinterlands.” Mozaffar, Masoud, Rastbin, & Ardahaey (2011) stated, “Social capital has been thought to contribute to a wide range of wellbeing outcomes such as health, education, economic growth and social cohesion.” Zelai & Nong (2008) stated:
Urban infrastructure is supposed to play a vital role in the urban growth process. In the endogenous-growth literature, infrastructure considered an explicative shifting of economic growth. Public infrastructure is part of the public capital stock that enters directly into the production function. At the city level, urban public, infrastructure is shared by all firms in the same city, which constitutes a valuable source of urbanization economies. Improvement of infrastructure in cities helps, on the one to achieve more agglomeration economies, and, however, to reduce diseconomies related to agglomeration, such as congestion, and pollution costs; hence, to build cities overall productivity.
According to Storper, & Scott (2009), “Economically advanced societies are marked by high levels of urbanization. The shorthand rationale underlying this observation is that the productivity of capital and labor is ardently enhanced where selected units of each come together in the geographic area to develop interconnected systems or agglomerations of firms and workers.”
Urbanization and growth go together: no country has ever reached the middle-income status without a significant population moving into cities. About development and growth theory, urbanization occupies an ambiguous position. Urbanization affects the development process especially through the enhanced flow of ideas and information because of agglomeration in cities.
Spatial concentration is most dramatically demonstrated by the role of urbanization, and of mega-cities, in development despite the vast diseconomies associated with developing country, there are even more powerful economies of scale making it worthy for firms to locate in these cities. Urban growth often goes to hand in hand with population growth. However, this link is not quite as easy as one may think. Urban growth is commonly thought to be the natural result of the regional population growth.
Invest directly in local people. Job training, job placement programs, excellent public schools, and adequately funded higher education assistance local residents directly. Also, invest in the community is crucial because a strong, livable, safe community with eminent neighborhood organizations and adequate parkland, recreational opportunities, community centers, and other local amenities will strengthen local business development and create many economic benefits.
Urban development is a common belief that indicating something for everyone. Prosperity reduces crime, augments education, boosts minority achievement, pays for better houses and a cleaner environment, and cuts poverty. Because of increasing adverts to scale, more jobs suggest new opportunities for specialization, for escaping monopoly, for finding better matches, for building bigger and more public facilities, and these costs can be spread over a wider base. The gains that a development plan can bring a city and its people are particularly compared with the gains that might be reaped from the other types of policies.
A conclusion economic growth is a worthy goal for cities to seek. Economic development externalities are real, though they have never been measured properly and are certainly not as strong as popularly believed. Economic growth is not a reliable way to fight poverty, but many other worthy activities are not reliable ways of fighting poverty either. The tools that cities often seek to promote economic development are not particularly useful, and some are spectacularly counterproductive, but some policies are better than others and most of the right ones can be identified without reference to economic development. Encouraging economic development plan, even on a geographically selective basis, does not seem to have much to commend it either. Upper-level governments should help lower-level governments use better tax systems, systems that apply for smaller deadweight losses, but a person does not need to study economic growth to fall to this conclusion. Ultimately, economic development is a lot like sleep. Sleep is great, but it is not a panacea. Moreover, it is a dream best pursued by not thinking about it. If a person, stay healthy and actively because he or she does not drink too much caffeine this person will fall asleep on his or her own. However if, this person thinks about whether he or she is falling asleep and worrying about it; he, or she will never fall asleep.