# 14-002/VIII (2014-01-02)

Mesbah J. Motamed, United States Department of Agriculture, United States; Raymond J.G.M. Florax, Purdue University, United States; and VU University Amsterdam, the Netherlands; William A. Masters, Tufts University, United States
Economic growth, economic geography, urbanization, agriculture, transportation
JEL codes:
C21, N50, O11, O18, R1

This paper addresses the timing of a location's historical transition from rural to urban activity. We test whether urbanization occurs sooner in places with higher agricultural potential and comparatively lower transport costs, using worldwide data that divide the earth's surface at half-degree intervals into 62,290 cells. From an independent estimate of each cell's rural and urban population history over the last 2,000 years, we identify the date at which each cell achieves various thresholds of urbanization. Controlling for unobserved heterogeneity across countries through fixed effects and using a variety of spatial econometric techniques, we find a robust association between earlier urbanization and agro-climatic suitability for cultivation, having seasonal frosts, better access to the ocean or navigable rivers, and lower elevation. These geographic correlations become smaller in magnitude as urbanization proceeds, and there is some variance in effect sizes across continents. Aggregating cells into countries, we show that an earlier urbanization date is associated with higher per capita income today.

Published in the 'Journal of Economic Growth', 2014, 19(3), 339-368.