Urbanization with and without Industrialization
AbstractMany theories link urbanization with industrialization; in particular, with the production of tradable (and typically manufactured) goods. We document that the expected relationship between urbanization and the level of industrialization is not present in a sample of developing economies. The breakdown occurs due to a large sub-sample of resource exporters that have urbanized without increasing output in either manufacturing or industrial services such as finance. To account for these stylized facts, we construct a model of structural change that accommodates two different paths to high urbanization rates. The first involves the typical movement of labor from agriculture into industry, as in many models of structural change; this stylized pattern leads to what we term "production cities" that produce tradable goods. The second path is driven by the income effect of natural resource endowments: resource rents are spent on urban goods and services, which gives rise to "consumption cities" that are made up primarily of workers in non-tradable services. We document empirically that there is such a distinction in the employment composition of cities between developing countries that rely on natural resource exports and those that do not. Our model and the supporting data suggest that urbanization is not a homogenous event, and this has possible implications for long-run growth.
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Bibliographic InfoPaper provided by Department of Economics, University of Houston in its series Working Papers with number 2013-290-26.
Date of creation: 01 Oct 2013
Date of revision:
Structural Change; Urbanization; Industrialization;
Other versions of this item:
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
- N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
- N90 - Economic History - - Regional and Urban History - - - General, International, or Comparative
- O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
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- Henderson, J. Vernon & Storeygard, Adam & Deichmann, Uwe, 2014. "50 years of urbanization in Africa : examining the role of climate change," Policy Research Working Paper Series 6925, The World Bank.
- Liu, Yaobin, 2014. "Is the natural resource production a blessing or curse for China's urbanization? Evidence from a space–time panel data model," Economic Modelling, Elsevier, vol. 38(C), pages 404-416.
- Carolyn Chisadza & Manoel Bittencourt, 2014. "Is Democracy Eluding Sub-Saharan Africa?," Working Papers 201403, University of Pretoria, Department of Economics.
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