A study of dynamic econometric relationship between urbanization and service industries growth in China

Purpose: The paper is going to analyze that there are dynamic quantitative relationships between Chinese urbanization and service industry. Design/methodology/approach: According to the index number of value-added of service industry and town population/total population ratio during the year of 1978 to 2012 in China, the paper is designed with models which are analyzed by ADF test, co-integration test, error correction model and Granger causality test, finally get the conclusion. Findings: The paper achieves the two conclusions, one is that urbanization is the important power of service industry's growth; the other is that the level of urbanization improves the level of service industry recently. Originality/value: Chinese urbanization and service industry have close relationship, and they also have dynamic changes. The paper studies their dynamic changes through collecting a lot of data from the year 1978 to 2010 and developing models to make quantitative analysis, for example, tables and quotations in the paper are the best proof. At last, the paper also puts forward some suggestions after get the conclusion that Chinese urbanization is the motive power to the growth of service industry.