The impact of trade openness on urbanization: Empirical evidence from BRICS economies

Abstract

The present study investigates the impact of trade openness on urbanization in BRICS countries, covering data from 1991 to 2017. The study uses instrument variable approach and two‐system least square method for the empirical analysis. Based on the empirical results, the study confirms the positive and significant link between trade openness and urbanization as per the New Growth Theory. The results show that the cities having more access to global trade links tend to be highly urbanized. The findings also suggest that the increasing urban concentration affects the export and import positively and enhances trade openness. However, the urban population concentration turns out to be affected negatively by trade openness in the centrally located regions. The agriculture commodity trade is found to be positively affected by the increased openness and GDP of BRICS economies. Finally, the findings suggested that trade openness plays a substantial role in promoting urban concentration in these five emerging market economies.