Preliminary Version:

In contrast to the literature, we argue that the urbanization-GDP growth relationship as characterized by their elasticity evolve in three stages. When the level of per capita income increases, the elasticity should be first low and then very high and then low again. Utilizing a panel data set of 38 country and 50 years covering 1975 to 2004 panel data set, we support this theory. We further find that China’s urbanization process has followed this pattern and is now in the second stage, although at each stage, China’s urbanization ratio is below comparable economies. By implication, China’s urbanization is poised to take off now.