Co-integration Analysis of Urbanization Development and Service Sector Growth in China

This paper analyzes the relationship between the urbanization development and the service sector growth of China with the annual statistics data from 1978 to 2010 by means of co-integration theory, error correction model and Granger-causality test. The empirical results show that there exists a long-term equilibrium relationship between the urbanization development and the service sector growth of China. The authors find that the urbanization development Granger causes the service sector growth and has positive effect on it both in the long run and in the short run, whereas the service sector growth dose not Granger causes the urbanization development, which means the service sector growth has no significant effect on the urbanization development.