Geography and Economic Transition: Global Spatial Analysis at the Grid Cell Level

last updated on March 20, 2009 This paper addresses the timing of historical transition from rural to urban activity. In our model, rural production is dispersed among consumers and is needed for subsis-tence, while urban production is agglomerated and requires transport to surrounding rural areas and to other cities. Urbanization occurs sooner when rural or urban pro-ductivity is higher, or transport costs are lower. We test the model on worldwide data that divides the earth’s surface at half-degree intervals into over 60,000 cells. From an independent estimate of each cell’s rural and urban population history, we identify the date at which each cell achieves various thresholds of urbanization. Controlling for country fixed effects and neighbors ’ urbanization using spatial techniques, we find that the date at which each cell passes each urbanization threshold is positively associated with its suitability for cultivation, having seasonal frosts, more access to navigable wa-terways and lower elevation. Aggregating cells into countries, an earlier urbanization date is linked to higher per capita income today