Utility Poverty and Urban Growth: Examining the Implications for Economic Inclusion in Developing Countries

ABSTRACT Urban growth in developing economies is increasingly occurring alongside persistent deprivation in essential utilities, raising concerns about the sustainability and quality of urbanisation. Thus, this study examined the effects of energy, digital, and water poverty on urban growth and their implication for economic inclusiveness. By using a panel of 74 developing countries from 2000 to 2023, inferences were drawn from panel corrected standard errors estimator, and robustness through panel dynamic ordinary least squares and generalised method of moments techniques. These methods complement each other to address cross‐sectional dependence, heteroskedasticity, and endogeneity issues. Empirically, a positive effect of energy and digital poverty on urban growth exists, reflecting the role of rural deprivation in pushing households towards cities in search of better access to electricity and connectivity, even when urban infrastructure remains limited. In contrast, water poverty demonstrated a restrictive effect on urban growth due to its direct impact on health, labour productivity, and livability. These dynamics are particularly evident in low‐ and lower‐middle‐income countries in Sub‐Saharan Africa and Asian countries, where rural utility gaps are pronounced, and in upper‐middle‐income Latin American and Caribbean economies where digital inclusion remains uneven. Furthermore, the control for the effects of population, income, and government effectiveness revealed that while population growth accelerates urbanisation, income growth had no significant impact, and governance reduces the pace of urban growth. Consequently, this research recommends addressing utility poverty in both rural and urban areas for achieving sustainable urbanisation, inclusive economic development, and improved living standards in developing economies.