argues that urban and rural employment and labor market conditions are fundamentally different, that there are serious issues of segmentation of urban labor markets into formal and informal employment, that urban housing, transport and social (education, health, and social protection) policies can have significant effects on how urban labor markets work, especially for the poor, and that community based civil society organizations (CSOs) have demonstrated a special capacity to generate employment for the poor.<sup>7</sup> An alternative reading of the economists’ argument suggests that long term trends in employment generation depend on the development of competitive industries that demand labor. This in turn depends from a number of national policies and institutions to support that growth, in addition to local supporting measures. Local job creation actions and policies that help people live in desirable locations and healthy environment can create limited employment benefits, but they cannot compensate for a tepid job generation. In the end it appears to us more a question of interactions of multiple causality rather than one of competing hypotheses about what drives the labor market. Research should help to understand these interactions better.

As in the case of slum improvement, Linn (2010) explores how a research design on the employment challenge can be tailored to consider specific other related challenges (the gender dimension, the functioning of land markets, the investment climate, etc.), specific instruments (micro‐credit schemes, multi‐stakeholder alliances, conditional cash transfer programs, etc.), analytical tools (happiness analysis, cost‐of‐doing‐business surveys, etc.) and institutions (especially the role of CSOs), with again perhaps a special focus on Africa and South Asia.

# 2. <u>Small and medium‐size cities</u>

Over half the world’s urban population lives in cities with less than 500,000 inhabitants, and almost 2/3 in cities below 1 million, with only 4 percent in “hyper‐ cities” with populations over 20 million. Small and medium size cities are projected to grow most rapidly among all city‐size categories, and all of the core problems of urbanization (including poverty and slums, lack of employment and services, poor governance, management and financial resources) are prevalent in spades in small and medium‐size cities. Moreover, national policy makers and international community have often neglected their problems, compared to the prevalent focus on the more visible plight of the large and mega‐cities.

Linn (2010) argues that a greater research focus on the small and medium‐size cities is therefore warranted. He points out that while the hurdles to research are severe, mostly due to lack of data and the multiplicity of locations, there are special instruments (such as tournament based approaches, conditional cash transfer programs, policy‐based and wholesaling lending approaches by aid agencies) and

> 7 Santiago Levy’s work on the Mexican conditional cash transfer program and social protection system is particularly relevant in documenting how policies and institutions can interact to affect urban employment and incomes in unexpected and potentially detrimental ways. (Levy 2007, 2008)

10