Impact of air pollution on urbanization: evidence at China’s city level

This paper investigates the effect and transmission mechanism of air pollution on urbanization based on data from China’s 107 cities during 2005–2018. In order to identify the impact of air pollution on China’s urbanization, we utilized night light data to represent the level of urbanization and used temperature inversion as an instrumental variable to mitigate endogeneity within the two-stage least squares framework. The results suggest that air pollution significantly slowed China’s urbanization process with economic growth acting as the transmission mechanism. The heterogeneity analyses revealed that air pollution had a greater negative impact on urbanization in northern regions than that in southern regions, and a greater negative impact in resource-oriented cities than that in non-resource-based cities. We also find that air pollution was to the detriment of urbanization in larger cities, which have more than 3 million residents, while it did not have a significant impact on Type II large cities, which have fewer than 3 million residents.