Urbanization and Economic Complexity

It is an established fact that urbanization in developed countries is accompanied by economic growth and industrialization with a mutually self-reinforced mechanism [1]. This historic pattern generated the expectation of a virtuous circle between economic growth and urbanization regardless local conditions. From classic urban economic theories to the more recent scaling approach to cities [2], the growth of urban population was routinely used as a proxy of economic growth. There are several theories aimed to explain urbanization processes. The most intriguing approach, it is rooted in the mutual indirect effect of World Trade Web (WTW) on the global urbanization processes. The dominant idea is that in open economies domestic communities (cities) can trade easily with other communities, boosting the exports, substituting industrialization and urbanization policy [3].
In this work, we couple the Economic Complexity [4,5] framework applied to WTW data with the urbanization level of more than 140 countries worldwide, between 1995-2010, to capture the fingerprint of urbanization on countries productive systems through the lens of the exports ‘similarity [6]. We notice that in rural economies the increasing of urban population creates structural changes in the exports’ network [7]. It boosts the countries diversification improving the country fitness and allowing the export of more complex products. These economic transformations fade away in countries that already have high level of urban population (more than 60%), where there is no relation between the urbanization process and the fitness. Within the sub-Saharan countries, we capture the ones where the virtuous circle between economic growth and urbanization is fostering structural changes in the countries productive systems. On the other hand, within the resource export-based countries, we assess the implementation of policy leading to urbanization without any structural transformations of their export basket.