Investigating the Factors Affecting Urbanization Rates in Iranian Provinces: Spatial Econometric Method

In the recent decades, the proportion of the world’s urban population has increased. Since the beginning of the twentieth century, the proportion of the world’s population residing in urban areas has risen from about 14 percent in 1901 to about 50 percent in 2000. The rapid growth of urbanization in the world began after the Industrial Revolution in European countries, and was then observed in developed and developing countries. In Iran, the process of urbanization and urban population growth was faster than in developing countries. During a period of about 50 years (1970-2020), the urban population in Iran grew by about 37%. There are a wide range of factors and reasons for explanation of the rapid urbanization in Iran. A reason for the growth of urbanization in Iran is the migration of rural population to urban areas, which has resulted from industrial policies, agricultural sector growth, wage gap between urban and rural areas, and employment opportunities in services and industry in urban areas.

Theoretical Framework

Urbanization began during the Industrial Revolution, and the term is used to refer to the growing number of people living in urban areas. It is not simply about an increase in the number of urban dwellers, but also about a change in the structure from rural to urban in terms of industry, employment, living conditions, and public social services. On the other hand, urbanization refers to the process of population expansion on urban scale, and includes economic, social, and geographic changes. Rapid urbanization is one of the most prominent features of global development today. In general, urbanization can be defined as a process of transition from a dominant world of rural and agricultural activities to a dominant urban world based on non-agricultural activities. Depending on their orientations, social scientists point out different explanations for the existence of cities. Developments in industry, agriculture, and services provide the main explanations for the rate of urbanization in the literature on urban economics. Moreover, wage differences between urban and rural areas, the general rate of prices in urban areas, and educational expenditures have been factors affecting the rate of urbanization in theoretical and experimental studies.

In this study, the spatial econometric approach was used for analysis of the model. Spatial econometrics is a subfield of econometrics that deals with the interactions between geographic units. Units can include postal code, city, municipality, district, province, government, judiciary, country, etc., depending on the nature of the study. Spatial econometric models can also be used to explain the behavior of economic agents and other geographic entities, such as individuals, companies, and governments, if they are interconnected through a network. Given the advantages of the spatial econometric method, this study aimed to investigate the effects of factors affecting urbanization in thirty provinces of Iran during the 2006-2017 period using a spatial econometric panel data method.

In this study, the Eviews and Stata software was used for analysis of the data. The results of the stationary test indicated that the model variables were stationary. Based on the Moran test results, there was a positive spatial autocorrelation in the study data. Other results also confirmed the the spatial Durbin model compared with other models. The results of the Chow and Hausman test also confirmed the superiority of the panel data to the pool data and of the fixed effects to the random effects. Other results demonstrated that the added value of agriculture, industry, and service had significant positive effects on the rate of urbanization in each province and the neighboring provinces. These results indicated that the development of the agricultural sector and the use of new technologies, and thus the increase in the productivity of the agricultural sector, led to the release of part of the labor force working in the agricultural sector in rural areas and their transfer to urban areas and employment in the service sector. The higher wage rates in the service and industry sectors also functions as a recruitment factor, attracting the liberated labor force from the rural sector to the urban sector, which was also demonstrated in this study. In contrast, the increase in the price index of the urban sector, which increased the costs of migration from rural to urban areas, could function as a repellent factor with adverse effects on migration from urban to rural areas. This was similar to the increase in the area of ​​agricultural land in rural areas, which could hinder or delay the transfer of rural population to urban areas. Another factor that played a key role in urban-to-rural migration was the rural unemployment rate, which could encourage the unemployed to migrate to urban areas.

The results of this research demonstrated that the variation in urbanization rate cannot be analyzed in one dimension, and a set of factors effective in the process of urbanization development in Iran need to be considered in the analysis, including a range of economic and geographic factors. In recent years, the focus on cities and regions has been resumed, but this focus on the role of cities and regions does not necessarily resemble the prevailing belief in the early twentieth century that the benefits of aggregation are driving growth in large cities and rich countries. Today, the driving forces of urbanization are different in different countries and even different regions of a country. The results of this study demonstrate that the Iranian economy needs a planned urbanization with a powerful policy for development of the agricultural and industrial sectors for the overall development of urbanization in Iran. Another proposal is to set the government as the main policymaker. In the first place, the government, the most important player in the society, must adhere to the rules in which it plays an important role. Secondly, the government’s policy orientation must be clear to all economic actors..