Types of urbanization and economic growth

ABSTRACT

What is the relationship between urbanization and economic growth? Though many scholars have long documented the impact of urbanization on economic growth, others find no relationship has been established between rates of urbanization and rates of growth. While urbanization has typically been theorized as the product of a Harris-Todaro push-and-pull framework that encourages migration to urban areas for economic opportunity, recent works indicate that growth in urban areas stems from several distinct mechanisms. By re- conceptualizing urbanization as resulting from two distinct mechanisms – natural increase and residual increase, respectively – we examine the impact of types of urbanization on economic growth. We find that while urban residual increase is corelated to economic growth, urbanization due to natural births and deaths is not. The results contribute to existing literature by providing an important insight into the factors behind economic growth and the effects of urbanization.

KEYWORDS:

• Urbanization
• Economic Growth
• Urban Natural Increase
• Migration
• Agglomeration

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Kotkin, Joel. 2019. “China’s Urban Crisis.” City Journal. https://www.city-journal.org/chinas-urban-crisis (Accessed July 19, 2019).

2 Arosanyin, Kemi. 2019. “Economic Opportunities of Megacities in Sub-Saharan Africa.” Global Trade. http://www.globaltrademag.com/global-trade-daily/economic-opportunities-of-megacities-in-sub-saharan-africa/ (Accessed July 19, 2019).

3 Hunter, Michael, J. David Selby, and Kevin C. DeSouza. 2019. “Cities Are Surprisingly Fragile.” Scientific American. https://blogs.scientificamerican.com/observations/cities-are-surprisingly-fragile/ (Accessed July 19, 2019). M., Rima, and Rakesh Sharma. 2019. “Digging Deeper: How Sustainable Are India’s Urban Engines?” Moneycontrol.com. https://www.moneycontrol.com/news/economy/policy/government-planning-to-list-10-more-cpses-to-achieve-2019-20-divestment-target-4200031.html (Accessed July 19, 2019).

4 Due to the limited number of data points available, all cases were not able to be gathered on the same year. However, the majority of cases were taken post-2005, and all cases were taken post-1950, when the developed world - developing world urbanization transition took place according to Jedwab and Vollrath (2015). GDP percent increase was taken for the same year as the urbanization data and used as the dependent variable. This decision was made for multiple reasons: first, data from the next year would have dropped cases, since some of the urban increase data was quite recent and GDP increase data was not available for the next year. Second, the causal relationship between migration to urban centres and economic development was not known, so data was used on the same year. Third, percent GDP increase was used in order to control for population sizes. The log was not taken, since percent GDP increase already normalizes results by dividing GDP growth by total GDP of a given state.