The effect of population growth, the pattern of demand and of technology on the process of urbanization

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Abstract

A nonlinear, three-sector, two-region wage and price endogenous dynamic general equilibrium model is used to study the effects of population growth, the pattern of demand, and technological change on urbanization in the context of a low-income developing country starting at a low level of urbanization. The model represents a closed economy and is therefore more suited to a large country. It is validated on Indian data and traces its development path well from 1950 to the present. The sectors modeled are agriculture, industry, and services with the latter two being located exclusively in urban areas. The three sectors are linked with an input-output matrix which subsumes transportation costs incurred between urban and rural areas. The model is designed to investigate long-term changes, e.g., over a 30-year period, and factor mobility is therefore assumed to be "almost perfect." The model demonstrates that rapid agricultural productivity growth, high rates of investment, and Engel demand effects combine to produce a continuing increase of urbanization as development occurs in an economy. The rate of urbanization is not necessarily dependent on high overall population growth: indeed, under certain conditions, a lowering of overall population growth might speed up the rate of urbanization. The pattern of demand and changes in the pattern can affect the rate of urbanization significantly: in particular, Engel-type demand changes serve to make the process of urbanization logistic. Technological bias effects are not very strong but effective appropriate technology policies might speed up urbanization. © 1984.

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Mohan, R. (1984). The effect of population growth, the pattern of demand and of technology on the process of urbanization. Journal of Urban Economics, 15(2), 125–156. https://doi.org/10.1016/0094-1190(84)90011-1

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