Urbanization with and without Industrialization∗

Abstract: Urbanization in developing countries is often linked with industrialization; in particular, with the production of tradable (and typically manufactured) goods. We show that the expected relationship between urbanization and the level of industrialization is not present in a sample of developing economies. The breakdown occurs due to a large sub-sample of resource exporters that have urbanized without ever industrializing. The patterns that we observe can be accounted for within a model of structural change that accommodates two different paths to high urbanization rates. The first path involves the typical movement of labor from agriculture into industry, as in many models of structural change; this pattern leads to what we term “production cities ” that make tradable goods for domestic and international markets. The second path involves an income effect arising from natural resource endowments; resource rents are disproportionately spent on urban goods and services, which gives rise to “consumption cities ” that are populated primarily by workers in non