The effects of population growth, of the pattern of demand, and of technology on the process of urbanization : an application to India
MOHAN, R.
This paper uses a computable economy wide dynamic general equilibrium model to study the effect of population growth, the pattern of demand and of technological change on urbanization in the context of a low income developing country starting at a low level of urbanization. The model is non-linear and models two regions (rural and urban) with wages and prices adjusting endogenously. It represents a closed economy and is therefore more suited to a large country such as India. The model is validated using Indian data and the simulation traces the development of the Indian economy well from 1950 to the present. Agriculture, industry and services are the three sectors modelled with the latter two being defined to be located exclusively in urban areas and agriculture in rural 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 thirty year period); factor mobility is therefore assumed to be almost perfect. The model demonstrates that rapid agricultural productivity growth high rates of investment, and Engel curve demand effects combine to increase urbanization as development occurs in an economy.
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