Urbanization vs Income per Capita in Asian Countries

A country that undergoes structural change will face greater urbanisation rates, i.e. migration to cities, and a relative shift in the composition of the economy towards the secondary and tertiary sector. That’s why I analyse urbanisation across Asian countries today. In particular, I have plotted urban population as percentage of total population against GDP per capita at PPP (in constant 2011 international $) for the year 2014 for all Asian countries for which data is available in the World Development Indicators database.

Urbanisation GDP.png

The diagram confirms that there is a positive correlation between urbanization and income per capita. Hence economic growth which leads to higher incomes tends to go together with an urbanisation of the country’s population.

Secondly, one can see that there is a geographical split across Asia. The trend lines (logarithmic) of Central, Southern and Western Asia have a similar flatter slope and the trend lines of Eastern and Southeastern Asia have a similar steeper slope. This means that a 1 percent increase in urbanisation of the total population seems to increase GDP per capita by a grater amount in Eastern and Southeastern Asia than in Central, Southern and Western Asia. This gap might be explained the observation that many Asian countries “have struggled to make the most of the opportunity urbanization provides them to transform their economies to join the ranks of richer nations in both prosperity and livability” (World Bank, 2015).

There are two outliers that differ greatly from the average. Firstly, Sri Lanka has a considerably lower urban population than its GDP per capita level would suggest. Secondly, Palestine (called West Bank and Gaza in the WDI database) has a considerably higher urban population compared to what its GDP per capita level would predict. In these two examples there might well be other factors that distort the normal relationship between urbanisation and GDP per capita such as conflict or adverse regulations and policies.

Lastly, the graph shows a clear difference in the overall performance of regions. Southern Asia and Central Asia are at the lower end of the spectrum in terms of urbanisation and income levels. Southeastern Asia is very diverse in economic development und urbanisation outcomes. Eastern Asia and Western Asia are at the higher end of the spectrum. Most notably, the trend in Eastern Asia is driven by Japan, Hong Kong and Macau (measured separately from China). Western Asia’s performance is driven by the oil rich countries such as United Arab Emirates, Saudi Arabia and Qatar.

That’s me for today! Thanks for reading!

Jasse


World Bank (2015). Leveraging Urbanization in Sri Lanka. [Online] Available at: http://www.worldbank.org/en/country/srilanka/brief/leveraging-urbanization-sri-lanka [Accessed 11/04/2016].

World Bank (2016). World Development Indicators. [Data] Retrieved from World Development Indicators (WDI) database: http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators&preview=on [Accessed 11/04/2016].

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