Cointegration Analysis on the Relation between Urbanization and Economic Growth in China

This paper utilizes cointegration theory, error correcting model and Granger causality testing theory to make an empirical research on the relation between urbanization and GDP in China, and also implements a comparative analysis to the relation between three industries and degree of urbanization, the related coeffecient is 0.97, 0.95, 0.97, 0.97. And the result shows a long-term balance between these two factors, and the promoting effect to tertiary industry by urbanization is more obvious. Urbanization and economic growth are the long-term balanced relations. In the long-term balance, every 1% increment of urbanization can make 4.82% increment of GDP; In short-term balance, if the balance depart from the long-term balance at the i-th term, the model will take automatic reversal adjustment with -0.06 adjusting strength at the (i+1)th term, to make it move to the long-term balance. The economic growth onto urbanization is one-way causality relationship, the primary and secondary industry onto urbanization is also one-way causality relationship. However, the tertiary industry onto urbanization is both-way causality relationship.