Urbanization without Industrialization: Evidence from 19th-century Hungary

Alexander Reinold

Publikation: Working/Discussion PaperWorking Paper/Preprint

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This paper investigates the underlying causes of Hungary's rapid urbanization in the second half of the 19th century. Contrary to the prevailing view, this study finds that the expansion of the manufacturing sector was not the driving force behind urbanization. Rather, this paper identifies the rising cash crop sector as the primary factor behind Hungary's urbanization. To establish causality, this paper employs an instrumental variable approach that takes advantage of Hungary's unique context, in which wetland conversion played a pivotal role in facilitating cash crop expansion. By examining detailed data at the municipal level, this paper identifies a combination of rural push and urban pull factors as the main mechanism for urbanization through cash crop expansion. Cash crop cultivation was linked to greater land concentration, which depressed labour demand and encouraged migration to cities. Additionally, this process was reinforced by a public spending bias towards urban areas. Finally, this paper finds that cities arising from cash crop expansion grew less in the subsequent decades than those arising from an industrial context suggesting that the origin of urbanization has long-term implications.
PublikationsstatusVeröffentlicht - Juni 2023


  • Urbanization
  • Structural Change
  • Resource Curse
  • Rural Poverty