Urbanization and Economic Complexity

TL;DR

This paper investigates the dynamic relationship between urbanization and economic complexity, revealing that urbanization significantly influences economic development in early stages but diminishes in importance for highly urbanized, resource-dependent countries.

Contribution

It provides a comprehensive analysis of how urbanization interacts with economic complexity over time across different stages of development.

Findings

Urbanization is linked to economic complexity in early development stages.

The relationship between urbanization and economic growth weakens in highly urbanized, resource-dependent countries.

Economic development and urbanization are interconnected during initial growth phases.

Abstract

Urbanization plays a crucial role in the economic development of every country. The mutual relationship between the urbanization of any country and its economic productive structure is far from being understood. We analyzed the historical evolution of product exports for all countries using the World Trade Web (WTW) with respect to patterns of urbanization from 1995-2010. Using the evolving framework of economic complexity, we reveal that a country's economic development in terms of its production and export of goods, is interwoven with the urbanization process during the early stages of its economic development and growth. Meanwhile in urbanized countries, the reciprocal relation between economic growth and urbanization fades away with respect to its later stages, becoming negligible for countries highly dependent on the export of resources where urbanization is not linked to any structural economic transformation.