Determinants of Urbanization

31 Pages Posted: 19 Jul 2013

See all articles by Anett John

Anett John


Guanghua Wan

Asian Development Bank Institute

Date Written: July 2013


In light of the United Nations' (UN) latest urbanization projections, particularly with respect to India and the People's Republic of China, a good understanding is needed of what drives aggregate urbanization trends. Yet, previous literature has largely neglected the issue in favor of studying urban concentration. Taking advantage of the latest UN World Urbanization Prospects, we use an instrumental variables approach to identify and analyze key urbanization determinants. We estimate the impact of gross domestic product (GDP) growth on urbanization to be large and positive. In answer to Henderson's (2003) finding that urbanization does not seem to cause growth, we argue that the direction of causality runs from growth to urbanization. We also find positive and significant effects of industrialization and education on urbanization, consistent with the existence of localization economies and labor market pooling.

Keywords: urbanization, economic growth, education, industrialization

JEL Classification: R11, O18

Suggested Citation

John, Anett and Wan, Guanghua, Determinants of Urbanization (July 2013). Asian Development Bank Economics Working Paper Series No. 355, Available at SSRN: or

Anett John (Contact Author)

CREST-ENSAE ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245


Guanghua Wan

Asian Development Bank Institute ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila

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