Urbanization and economic growth: A dynamic panel data study

With the panel data of China´s 31 provinces in 1997-2004, the paper uses dynamic panel GMM estimation to test the impacts of urbanization on economic growth taking the urbanization ratio and the urban primacy ratio as urbanization index. The result shows that the urbanization ratio has a negative but small impact on economic growth. Furthermore, it also reflects urbanization boosts economic growth within a certain economic development degree and the growth effect of urbanization turns negative beyond it. Now all provinces are above the critical level, which means a simple extension-type expansion will impede economic growth with the evolution of urbanization. In addition, the urban primacy ratio does not have a significant influence on economic growth, which is inconsistent with the prior finding of Henderson. Therefore, this paper provides suggestions of urbanization in order to promote china´s economic growth.