The Impact Of Urbanization On Economic Growth: Evidence From Ethiopia

Abstract

Urbanization is a dynamic procedure of shifting the rural population to urban primacy. There exists a historical relationship between urbanization and economic advancement. In this study, the association between economic growth and urbanization pattern and by considering the data on urbanization and economic growth from 1981-2021 in Ethiopia is investigated using time series data. Unit root test, autocorrelation test, model specification test, heteroscedasticity test, stability test and co-integration test was conducted. The outcomes of the ARDL regression model support the general notion of a positive link between the urbanization measured by urban population share, and economic growth is measured through real GDP. Accordingly it found, found that urbanization had a significant positive impact on economic growth both in short run and long run. Whereas except inflation rate other variables gross capital formation and labour force has positive impact on economic growth. The speed at which disequilibrium occurred in short run returns to long-run equilibrium is by 81 % in the current year as indicated by the coef icient of the error term. Consequently, Policymakers should use this information to create targeted policies for sustainable and inclusive economic development. Social and environmental impacts of urbanization should also be considered when developing policies. Further research is needed to understand the impact of dif erent types of urbanization, urban planning, and technological innovation on