Urbanization with and without Industrialization
Many 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 simple 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.
|Date of creation:||Jan 2014|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.gwu.edu/~iiep/|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- N/A, 2008. "The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 203(1), pages 8-30, January.
- N/A, 2008. "The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 204(1), pages 9-14, April.
When requesting a correction, please mention this item's handle: RePEc:gwi:wpaper:2014-01. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kyle Renner)
If references are entirely missing, you can add them using this form.