This paper focuses on the growing urban economic challenges facing both developing and industrialized countries. Cities are clearly the engines of growth for most national economies. The paper identifies the dynamic conditions of urban economies and suggests areas deserving policy attention and increased research. It focuses on three foundational components of the urban economy: employment, productivity, and urban finance and emphasizes the need for studies of the economic structure of cities in order to identify priority sectors for development.

The paper further suggests the need for a broader analytic and multi-level perspective on these issues which includes the macro-economy, the city, the neighborhood, the firm, and the household. Part I frames the challenges, while Part II proposes components of an analytic framework for the urban economy. Part III suggests a policy agenda for the urban economy. Part IV identifies questions for further research and some possible work program activities which might be undertaken by UN Habitat.