The effects of economic growth on Chinese urbanization: panel data approach

The coordination between the levels of urbanization and economic growth is very important to realize rural-urban and regional development as a whole. But China's urbanization level lags behind economic growth level seriously. This paper aims to probe into the economic factors that contribute to the lag and to make quantitative analysis on its force. This topic has been discussed extensively by scholars using the general model with the panel data of cross-country in the world. The empirical growth literature has been documented that the estimate of panel data approach is more robust than that of cross-sectional approach in cross-country studies. First, we divide countries into low-income group, middle-income group and high-income group, then we select 70 countries and data between 1982 and 1997 which are offered by World Bank's World Development Report, and then we construct a world model which will affect urbanization level. By using the standard analysis tool-panel analysis in transnational economic empirical analysis, we found that in the period of low and middle-income, per capita GDP has the greatest effect on urbanization. Since the tertiary industry is the main force of urbanization, the secondary industry should be the original force of urbanization. In the period of high and middle-income, the force of tertiary industry has the greatest effect while in the period of high-income, the force of higher education and international trade becomes outstanding. Based on the world model, we construct a model which includes the factors that will affect China's urbanization level. By using the fourth and fifth census data and other official statistic data, we make a quantitative analysis on the economic factors which contribute to the lag of China's urbanization and found that the elasticities of per capita GDP, secondary industry ratio, tertiary industry ratio, international trade and higher education to urbanization are 0.420, 0.196, 0.197, 0.103 and 0.048 respectively. Finally, through the comparison between different countries, we found that the force of each economic factor in China is the same as that in the world, which means that the evaluation result of the two models is robust on the one hand, and that China's urbanization is in conformity with the general law of world's urbanization on the other hand. However, further analysis shows that the force of economic growth, secondary industry, tertiary industry and higher education are relatively laggard in China. Among them, the difference of tertiary industry's elasticity to urbanization is most evident, being only 43.8% of the world, and the next is secondary industry ratio, higher education level and international trade, which are 56.3%, 56.4% and 71.5% respectively. And the economic growth's elasticity to urbanization is 76.3% of that in the world. The main reason for this phenomenon is the close relationship with China's unique urbanization mode. The bottom-up urbanization,motivated by township enterprises as well as foreign investment results in the decentralization of non-agricultural industries and population. Therefore, China should promote the upgrade of tertiary industry and develop higher education vigorously by improving the agglomeration ability of secondary industry, repeal urbanization system and policy obstacle, thereby realize the coordinated development between urbanization and economic growth.