The Welfare Economics of Rural‐To‐Urban Migration: The Harris‐Todaro Model Revisited

Abstract

In this paper we extend the Harris-Todaro model of rural-to-urban migration to include urban agglomeration effects, some urban real wage flexibility, and a government budget constraint. Without employment subsidies laissez-faire migration is excessive unless real wage flexibility and agglomeration effects are high. Laissez-faire migration is too low compared with the first-best outcome supported by a subsidy, if its financing involves no costs. Simulations suggest that such a program would imply a substantial increase in taxation. If, as seems likely, an increase of this magnitude involves economic costs then the optimal outcome falls well short of first-best.

Efficiency wages, agglomeration, and a developing dual economy

“…This is known as ''urban bias'' in the literature and as mentioned before, it depends on the elasticity of urban wage with respect to unemployment, i.e., the shape of the value of marginal product curve of labor and the NSC curve. 6 In their analysis of urban bias, Krichel and Levine (1999) have developed a measure of elasticity of wage with respect to urban unemployment using urban wage as a declining function of unemployment. In this section, I will develop a measure of wage elasticity using the nonshirking constraint and show that this wage elasticity depends not only on unemployment, but also on parametric values of turnover rate, b, the rate of discount, i, and the probability of getting caught while shirking, q.…”

The Impact of a Customs Union with the European Union on Internal Migration in Turkey

“…12 For a detailed discussion see Blanchflower and Oswald (1994). Within the Harris-Todaro context, the bargain real wage relationship has been postulated by Krichel and Levine (1999), whereas the efficiency wage hypothesis has been assumed by Brueckner and Zenou (1999). market models, which CGE analysis can handle easily.…”

“…It is well known in the literature that a social optimum can be supported by equal subsidies to both types of employment (Bhagwati and Srinivasan, 1974). However, these programs may require large resources, which ultimately cause an increase in general taxation (Krichel and Levine, 1999). One of the equilibrium conditions of the CGE model is represented by the government budget constraint.…”

Rural-Urban Migration and Earning Gains in Iran

“…Ever since the seminal work of Ravenstein [1] numerous studies have explored various aspects of this pervasive phenomenon. Issues covered by the literature include the rationale for migrating [2,3] , migration patterns [1,4] , and the welfare impacts of these population movements [5][6][7] . The enormous research interest in migration is a reflection of the prevalence of this livelihood activity [8] .…”