Government-driven urbanisation and its impact on regional economic growth in China

Abstract

This article interrogates the role of local Chinese governors in government-driven urbanisation. This process often involves local governments converting rural land to urban land rather than local governments incentivising rural-to-urban migration. This study proposes a method to find a proxy variable of government-driven urbanisation and performs an exploratory study of its impact on economic growth. Its empirical analysis is based on provincial data from 1996 to 2015, a period of intense urbanisation in China. The results show that urbanisation has had various effects on growth across different provinces, and that some provinces exhibit a phenomenon called ‘urbanisation without growth’. This may be because local governors push urbanisation too heavy that it can hardly generate positive effects, such as external consumption, technology diffusion, and a larger pool of urban labour. This is similar to the phenomenon of over-urbanisation experienced in some developing countries. As a main driver of over-urbanisation, government-driven urbanisation has typical Chinese characteristics, but this paper's findings still have significant implications for other emerging economies.