Trade Openness and Urban Concentration: New Evidence

Trade Openness and Urban Concentration: New Evidence

In this paper, I reexamine the empirical relationship between trade openness and urban concentration. Using a panel data set of more than 110 countries for the period from 1970 through 2000, I find that previous results of a negative association between trade openness and the size of a country`s largest city are not robust. More importantly, the openness-concentration link disappears completely, once reverse causality and the endogeneity of trade are accounted for. There is no evidence that trade liberalization significantly reduces urban concentration. Similarly, openness is insignificant if trade is instrumented by geographic characteristics.