Social Sciences in China (Chinese Edition)

No.7, 2014

The Enigma of Under-Urbanization: An Explanation Based on International Trade

(Abstract)

Ni Pengfei, Yan Yingen and Zhang Anquan

In the course of industrialization, the question of how to understand and counteract China’s lagging urbanization is crucial to the deepening of all-round reform. This essay constructs a model for the shift of the surplus rural labor force under open economy conditions and researches the relations between under-urbanization and international trade using 1995-2010 data from 40 countries that have not completed their industrialization. It finds that within an open economy system, the extent to which a country’s urbanization rate lags behind its rate of industrialization is significantly and positively correlated with its net export rate, provided the country concerned has a substantial surplus labor force and its goods and services can be sold to foreign markets; the higher the level of marketization, the lower the urban unemployment rate, and the poorer sanitation facilities are in a country or region, the greater the likelihood of under-urbanization; and there is an “inverse U-shaped” relationship between under-urbanization and per capita GDP.