Does state-led urbanization come at the cost of agriculture? Evidence from China

PurposeThis paper explores the relationship between state-led urbanization and primary industry development using the difference-in-differences (DiD) method.Design/methodology/approachThe study uses the DiD method.FindingsExploiting county-city mergers during 2010-2018, the key strategy to expand the city outward and promote urbanization on the urban fringe by local government, the authors find that county-city mergers led to the growth of primary industry decline by 4.23%. The result can be explained by the loss of essential production factors, including land and labor used for farming. In addition, the negative effect is more pronounced for counties with more substantial manufacturing. The results indicate that urbanization in China relocates land and labor; however, it does not improve the efficiency of agricultural output.Originality/valueThis paper contributes to the understanding of urbanization and rural development from the perspective of the primary industry by showing production factor redistribution. Second, this study complements the literature on local government mergers.