DOI:10.52340/ekonomisti.2025.04.02

Expanded Summary 

The article presents a theoretical and empirical examination of urbanization,  as a major contemporary global transformation, exploring its complex, non-linear relationship with a social, economic, and environmental characteristics. The study emphasis  that urbanization is not merely a consequence of development, but functions as a critical determinant influencing income distribution, equity, ecological stability, and the trajectory of national progress—a role corroborated by its designation within the Sustainable Development Goals (SDGs) framework. The paper\\\\\\\\\\\'s primary objective is to provide an empirical investigation of these multidimensional effects, with a specific application to the regional context of Georgia.

The paper highlights the work of classical economists and modern empirical research:

Kuznets\\\\\\\\\\\' Hypothesis and the Urban Environmental Kuznets Curve (UEKC). The article discusses the inverse U-shaped relationship between urbanization and inequality, suggesting that inequality initially rises in the early stages of urbanization but subsequently declines. This non-linear connection is confirmed by several empirical studies cited.

Agglomeration Theories: Reference is made to Krugman\\\\\\\\\\\'s model of New Economic Geography, which explains the formation of agglomeration and its role in regional inequality, and Glaeser\\\\\\\\\\\'s work on the positive influence of urbanization on human capital.

The article details various metrics used in economic literature to quantify urbanization: Level of Urbanization; Urban-to-Rural Population Ratio: Compares urban residents to rural residents; City Size: Focuses on the absolute size and number of large cities; Rate of Urbanization: Measures the annual percentage change over time, and a modern, harmonized definition, Degree of Urbanization (DEGURBA).

The study systematically groups the effects into three categories:

The article presents a comparative analysis, confirming that a clear positive correlation exists between urbanization levels and GDP per capita globally, consistent with economic theory.

The study examines the issue of Urban Primacy, where the largest city (often the capital) contains a disproportionately large share of the urban population. Georgia is identified as a country, along with Mongolia and Uruguay, where over half of the urban population resides in the largest city (Tbilisi).

To assess city size distribution, the study applies Zipf\\\\\\\\\\\'s Law   -   . The analysis of 32 Georgian cities suggests that the country\\\\\\\\\\\'s distribution is partially consistent with Zipf\\\\\\\\\\\'s Law, but Tbilisi acts as a significant outlier—its population is several times greater than what the model would predict for α = 1. This confirms Georgia\\\\\\\\\\\'s primate city structure. Using statistical data from 11 Georgian regions (2006–2023),  we employed advanced econometric methods:

Based on the results of the LMER (Linear Mixed-Effects Regression) and Fixed Effects (FE) modeling, we conclude that regional variation is dominant, confirming the substantial structural disparity between Tbilisi and the rest of the country\\\\\\\\\\\'s regions. This finding is further corroborated by the results derived from MANOVA (Multivariate Analysis of Variance). This analysis confirmed a statistically significant difference in the vector of socio-economic indicators (HDI, GNIpc, Gini) between regions categorized as having "High" versus "Low" urbanization levels (Wilks λ= 0.3122, p=0.0008). The results strongly support that a high level of urbanization in Georgia is associated with higher HDI, higher GNIpc, and lower Gini Coefficient.

In light of these findings, we deem it critical to strengthen secondary urban centers. This necessitates the deployment of targeted capital investments in key regional centers exhibiting significant growth potential (e.g., Kutaisi, Batumi, and Rustavi) to facilitate the emergence of agglomeration economies and promote polycentric development outside of the primate capital - Tbilisi. This strategic approach is expected to mitigate Tbilisi’s role as an economic primate city and foster balanced regional development.

The observed positive correlation between escalating urbanization rates and an increase in the Gini coefficient indicates a clear trend of disproportionate distribution of the economic and social benefits derived from urban growth. Implementing targeted regional programs designed to expand development opportunities will reduce labor market disparities and slow the escalation of the Gini coefficient.

The intensification of urbanization is anticipated to positively influence both the Human Development Index (HDI) and average wage levels. Accordingly, the strategic cluster integration of higher education institutions and the private sector is paramount. This integration will establish a robust cooperative framework between academic entities and private sector firms within urban agglomerations. Consequently, this process will accelerate innovation dissemination and significantly enhance the efficiency of human capital accumulation (Human Capital Accumulation Effect).

Regarding environmental aspects, subsidizing municipal electric transport and reducing the traffic burden in city centers represent a vital step toward lowering emissions in central urban areas. Moreover, the systematic development of a network of urban forests and parks will significantly mitigate the effects of air pollution and improve the overall ecological indicators of the city.