Expending Cities and Commercial Cultures: Impact of Urbanization on Foreign Trade

Abstract

The prosperity of urbanization is accompanied by the rise of foreign trade. Urbanization, as a phenomenon of economic expansion of cities and towns, breeds cultures that make local people attach importance to, and are willing to engage in business, which could promote the regional foreign trade. Using the urbanization rate of permanent residents in each city as an indicator, and the number of earthquakes recorded between 780 BC and 1970 AD as an instrument, we find that for every 1% increase in the urbanization rate of a region, its foreign trade increased by 3.92%. We also find that commercial culture is shaped by urbanization through residents' income and influences the foreign trade by creating an atmosphere of innovation in society.