Do macroeconomic factors promote urbanization? Evidence from BRICS countries

Do macroeconomic factors promote urbanization? Evidence from BRICS countries
Author: Sabyasachi Tripathi
Journal: Asia-Pacific Journal of Regional Science
Volume:  Volume 5, 2021
Published: 17 November 2020

This study investigates whether macroeconomic forces drive urbanization in the BRICS nations—Brazil, Russia, India, China, and South Africa. Using dynamic panel data covering 1960–2015 at five-year intervals, the analysis evaluates how economic indicators shape urban population size, growth, and density. The results show that several macroeconomic variables significantly contribute to higher levels of urbanization.

Key drivers include foreign direct investment (FDI), total GDP, trade openness (exports and imports), broad money, inflation, employment in industry and services, the working-age population (15–64), and energy consumption. These factors reflect structural economic change, industrial expansion, and the pull of urban labor markets, thereby encouraging population movement toward cities.

Two variables—GDP growth rate and gross capital formation—specifically influence the absolute size and growth of urban populations, indicating that stronger economic performance and investment levels spur the physical expansion of urban areas.

The study notes substantial differences in how BRICS countries define “urban,” along with inconsistent availability of urban GDP data, particularly in India. Due to such limitations, total national GDP is used instead of urban GDP.

Overall, the findings stress the need to align macroeconomic strategies with urban policy. To maximize the developmental benefits of urbanization, BRICS governments must integrate national economic planning, demographic policies, and investment priorities with long-term urban development frameworks.