Economic growth and urbanization: A cross-section and time-series analysis of thirty-five developing countries

Abstract

In this paper, we discuss the influence of urbanization and urban primacy on the economic growth rates of developing nations. Included in the paper is preliminary evidence, from cross-section and time-series analyses, that while urbanization is an inevitable product of economic development, the process of urbanization is best achieved when the urbanization is managed and gradual. Time-series and cross-section analyses indicate a negative relationship between urbanization and urban primacy and economic growth. However, further cross-section analysis shows that all industrialized economies are highly-urbanized. The dichotomy is explained in that urbanization is inevitable with economic growth, but the pace and character of urbanization also matters. We present a basic model that predicts the economic growth rates of developing nations. The tests performed could only follow the general tone of the model because of the limitations of the data sources. (JEL: O10, O18, O40)