Which comes first - urbanization or economic growth? Evidence from heterogeneous panel causality tests

Brantley Liddle and George Messinis

Applied Economics Letters, 2015, vol. 22, issue 5, 349-355

Abstract: Heterogeneous panel causality tests are employed to consider the relationship between urbanization change and economic growth. Urbanization causes economic growth in high-income countries, but noncausality could not be rejected for both middle-income and Latin American countries. A bi-directional, equilibrium relationship is observed for low-income, predominately African countries where economic growth has a positive, causal effect on urbanization, but where urbanization has a negative, causal effect on economic growth. Hence, urbanization and economic growth either co-evolve in low-income/African and high-income countries, or else the two processes are decoupled for middle-income and Latin American countries.

Date: 2015
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Working Paper: Which comes first—urbanization or economic growth? Evidence from heterogeneous panel causality tests (2013)
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DOI: 10.1080/13504851.2014.943877

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