25 pro-heights likely suggests looser height restrictions there.

# **6. The Influence of Urban and Rural Areas as Countries Develop**

We just found that upward construction and outward construction respectively account for 60%-65% and 40%-35% of international volume differences, with the contribution of upward construction almost entirely driven by low-rises. Since countries simultaneously urbanize as they develop, and since urban areas differ from rural areas in many dimensions, we investigate how construction patterns depend on urban status. We first show that low-rises and high-rises more strongly explain volume differences across world cities than across countries. This leads us to examine if cities drive international volume differences across countries. However, we find that rural areas and small towns, not cities, disproportionately influence the distribution of volume per capita at a global scale. Medium to small cities, not large cities, then dominate total urban volumes. More generally, we discuss how urbanization is not the primary factor underlying the building stock-income relation observed across countries. Finally, we use our city-level analysis to study the upward vs. outward specializations of selected urban systems and world megacities.

**6.1. International Volume Differences across Cities**

Our definition of _urban areas_ includes 12,831 cities above 50,000 people in 2015 as identified by GHS-UCDB (Florczyk et al., 2019). Therefore, in our analysis, _rural areas_ include small towns and villages below 50,000 people in 2015. Table 2 shows selected summary statistics for urban vs. rural areas. Comparing Tables 2 and 1, the volume per capita added by building upward makes a larger difference at the city level than at the country level. For example, upward building accounts for 55% of total city volumes as compared to 48% at the country level.

Similarly to what we found at the country level, city volume per capita increases with city incomes (Appx. Section C2.-C4. and Appx. Fig. C.3).<sup>6</sup> Using the same regression analyses as before, heights explain between two-thirds and three-fourths of the global city volume-income relation (we found 60%-65% at the country level) (Appx. Section C5. and Appx. Fig. C.4-C.6 for the scatterplots). Low-rises and high-rises account for _∼_ 90% and _∼_ 10% of the upward volumeincome relation, hence 65% and 10% of the total volume-income relation (25% for areas). At the country level, lower contributions of 60% were found for low-rises and 5% for high-rises. Lastly, we find very similar patterns and differences considering developing economies only.

Hence, upward construction appears relatively more important for cities than for rural areas. Combined with the fact that more developed economies are also more urbanized, this could

> 6We use the 2015 city GDP data from Chen et al. (2022) who provide high-resolution “real GDP” data (in 2017 dollars) based on (not top-coded) night lights data as reported by the NPP/VIIRS satellite series. While night lights data could capture infrastructure (including electrification) and past economic development in addition to current economic development as infrastructure and urban structures are durable, we use this data in the absence of better data on city incomes for the whole world. Nonetheless, the city-level results should be taken with caution.