Transaction Efficiency,Industrialization and Urbanization:A Model and Empirical Evidence to Understand China's Economic Development

This paper introduces transaction efficiency into a dynamic model of industrialization and urbanization and obtains several testable hypotheses.Evidence from Chinese provinces for the period 1997 to 2002 shows that improvements made to transaction efficiency is an important engine for urbanization and economic development.However,industrialization does not lead to urbanization.This means that China's industrialization is a result of government interventions while urbanization is more a result driven by markets.