Identifying Threshold Level of Urbanization for Economic Growth in Developing and Developed Asian Economies

Abstract

This study scrutinized the relationship between urbanization and economic growth in 11 developed and 23 underdeveloped Asian countries from 1998 to 2021. The study formulated dynamic and static models and employed the Fixed Effect Model and Dynamic GMM for estimation. The results of both static and dynamic models illustrated that urbanization augments growth in developed and developing countries, however, the nature of this relationship is non-linear. The study calculated the threshold level of urbanization and established that after this threshold level, the impact of urbanization on growth reverses. In the static model, developed and developing countries have thresholds of 68.08% and 53.8%, respectively. In the dynamic model, developed and developing countries maintained thresholds of 77.6% and 61.5%, respectively. The study concluded that urbanization and growth share a non-linear association in both developed and developing countries, and this relationship is not contingent upon the type of model or technique being used.