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Migration unemployment and development: a two-sector analysis.
01 Mar 1970-The American Economic Review (American Economic Association)-Vol. 60, Iss: 1, pp 126-142
TL;DR: In this paper, the authors examined why rural-urban labor migration persists and is even increasing in many developing nations despite the existence of positive marginal products in agriculture and significant levels of urban unemployment, and concluded that in the absence of wage flexibility an optimal policy would include both partial wage subsidies or direct government employment and measures to restrict free migration.
Abstract: This study examines why rural-urban labor migration persists and is even increasing in many developing nations despite the existence of positive marginal products in agriculture and significant levels of urban unemployment. Conventional economic models have difficulty reconciling rational behavioral explanations with growing levels of urban unemployment in the absence of absolute labor redundancy in the overall economy. This paper formulates a 2-sector model of rural-urban migration which recognizes the existence of a politically determined minimum urban wage at levels substantially higher than agricultural earnings. The distinguishing feature of the model is that migration proceeds in response to urban-rural differences in expected earnings with the urban employment rate acting as an equilibrating force on such migration. The overall model is used to demonstrate 1) that given the politically determined high minimum wage the continued existence of rural-urban migration in spite of substantial urban unemployment represents an economically rational choice on the part of the individual migrants and 2) that economists standard policy recommendation of generating urban employment opportunities through the use of "shadow prices" implemented by means of wage subsidies or direct government hiring may lead to a worsening of the urban unemployment problem. Welfare implications of alternative policies associated with various programs to retain rural population are assessed under the assumption that the full wage flexibility suggested by economic theory is politically unfeasible; it is concluded that in the absence of wage flexibility an optimal policy would include both partial wage subsidies or direct government employment and measures to restrict free migration. The basic model is a 2-sector internal trade model with unemployment the 2 sectors being the permanent urban sector which specializes in production of manufactured goods and the rural which either uses all available labor to produce agricultural goods or exports part of the labor to the urban sector. It is assumed that the typical migrant retains his ties to the rural sector but the assumption is not necessary for the argument.
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TL;DR: In this article, the authors studied the impact of competitive import licenses on the economy and the relationship between welfare cost of quantitative restrictions and tariff equivalents, and showed that the effect of wage legislation on equilibrium levels of unemployment.
Abstract: Studies the impact of competitive import licenses on the economy. Value of rents associated with import licenses; Relationship between welfare cost of quantitative restrictions and tariff equivalents; Impact of wage legislation on equilibrium levels of unemployment. (Из Ebsco)
4,933 citations
TL;DR: In this article, the authors present a discussion of current theories that clarify basic assumptions and hypotheses of the various models of international migration, including macro theories of neoclassical economics, micro theories of macro-economic economics, new economics with examples for crop insurance markets futures markets unemployment insurance and capital markets, dual labor market theory and structural inflation motivational problems economic dualism and the demography of labor supply; and world systems theory and the impacts of land raw materials labor material links ideological links and global cities.
Abstract: The configuration of developed countries has become today diverse and multiethnic due to international migration. A single coherent theoretical explanation for international migration is lacking. The aim of this discussion was the generation and integration of current theories that clarify basic assumptions and hypotheses of the various models. Theories were differentiated as explaining the initiation of migration and the perpetuation of international movement. Initiation theories discussed were 1) macro theories of neoclassical economics; 2) micro theories of neoclassical economics; 3) the new economics with examples for crop insurance markets futures markets unemployment insurance and capital markets; 4) dual labor market theory and structural inflation motivational problems economic dualism and the demography of labor supply; and 5) world systems theory and the impacts of land raw materials labor material links ideological links and global cities. Perpetuation theories were indicated as network theories of declining risks and costs; institutional theory cumulative causation through distribution of income and land organization of agrarian production culture of migration regional distribution of human capital and social labeling factors; and migration systems theory. The assumptions and propositions of these theories although divergent were not inherently contradictory but had very different implications for policy formulation. The policy decisions over the next decades will be very important and carry with them the potential for misunderstanding and conflict. Policy options based on the explicated models range from regulation by changing wages and employment conditions in destination countries or promoting development in countries of origin to changing structural market economic relations.
3,417 citations
TL;DR: In this paper, the authors reviewed the recent literature on diversification as a livelihood strategy of rural households in developing countries, with particular reference to sub-Saharan Africa, and concluded that removal of constraints to, and expansion of opportunities for, diversification are desirable policy objectives because they give individuals and households more capabilities to improve livelihood security and to raise living standards.
Abstract: This article reviews the recent literature on diversification as a livelihood strategy of rural households in developing countries, with particular reference to sub‐Saharan Africa. Livelihood diversification is defined as the process by which rural families construct a diverse portfolio of activities and social support capabilities in order to survive and to improve their standards of living. The determinants and effects of diversification in the areas of poverty, income distribution, farm output and gender are examined. Some policy inferences are summarised. The conclusion is reached that removal of constraints to, and expansion of opportunities for, diversification are desirable policy objectives because they give individuals and households more capabilities to improve livelihood security and to raise living standards.
2,298 citations
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TL;DR: The authors argue that if wages are largely set by bargaining between insiders and firms, shocks which affect actual unemployment tend also to affect equilibrium unemployment, which implies that shocks have much more persistent effects on unemployment than standard theories can possibly explain.
Abstract: European unemployment has been steadily increasing for the last 15 years and isexpected to remain very high for many years to come. In this paper, we argue thatthis fact implies that shocks have much more persistent effects on unemployment thanstandard theories can possibly explain. We develop a theory which can explain suchpersistence, and which is based on the distinction between insiders and outsiders inwage bargaining. We argue that if wages are largely set by bargaining betweeninsiders and firms, shocks which affect actual unemployment tend also to affectequilibrium unemployment. We then confront the theory to both the detailed facts ofthe European situation as well as to earlier periods of high persistent unemploymentsuch as the Great Depression in the US.
1,695 citations
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TL;DR: A statistical framework is developed that uses satellite data on lights growth to augment existing income growth measures, under the assumption that measurement error in using observed light as an indicator of income is uncorrelated with measurementerror in national income accounts.
Abstract: GDP growth is often measured poorly for countries and rarely measured at all for cities or subnational regions. We propose a readily available proxy: satellite data on lights at night. We develop a statistical framework that uses lights growth to augment existing income growth measures, under the assumption that measurement error in using observed light as an indicator of income is uncorrelated with measurement error in national income accounts. For countries with good national income accounts data, information on growth of lights is of marginal value in estimating the true growth rate of income, while for countries with the worst national income accounts, the optimal estimate of true income growth is a composite with roughly equal weights. Among poor-data countries, our new estimate of average annual growth differs by as much as 3 percentage points from official data. Lights data also allow for measurement of income growth in sub- and supranational regions. As an application, we examine growth in Sub Saharan African regions over the last 17 years. We find that real incomes in non-coastal areas have grown faster by 1/3 of an annual percentage point than coastal areas; non-malarial areas have grown faster than malarial ones by 1/3 to 2/3 annual percent points; and primate city regions have grown no faster than hinterland areas. Such applications point toward a research program in which "empirical growth" need no longer be synonymous with "national income accounts."
1,449 citations
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TL;DR: In this paper, an economic behavioral model of rural urban migration is formulated which represents a realistic modification and extension of the simple wage differential approach commonly found in the literature and this probablistic approach is incorporated into a rigorous model of the determinants of urban labor demand and supply which when given values for the crucial parameters can be used among other things to estimate the equilibrium proportion of the urban labor force that is not absorbed by the modern industrial economy.
Abstract: An economic behavioral model of rural urban migration is formulated which represents a realistic modification and extension of the simple wage differential approach commonly found in the literature and this probablistic approach is incorporated into a rigorous model of the determinants of urban labor demand and supply which when given values for the crucial parameters can be used among other things to estimate the equilibrium proportion of the urban labor force that is not absorbed by the modern industrial economy. Additionally the model will provide a convenient framework for analyzing the implications of alternative policies designed to alleviate unemployment by varying 1 or more of the principal parameters. A more realistic picture of labor migration in less developed nations would be one that views migration as a 2 stage phenomenon: in the 1st stage the unskilled rural worker migrates to an urban area and spends a certain period of time in the "urban traditional" sector; and the 2nd stage is reached with the eventual attainment of a more permanent modern sector job. This 2 stage process allows one to ask some basic questions concerning the decision to migrate the proportionate size of the urban traditional sector and the implications of accelerated industrial growth and/or alternative rural urban real income differentials on labor participation in the modern economy. In the model the decision to migrate from rural to urban areas is functionally related to 2 principal variables: the urban rural real income differential and the probability of obtaining an urban job. To understand better the nature of the supply function to be used in the overall model of the determinants of urban unemployment it is helpful to state the underlying behavioral assumptions of the model of rural urban migration: it is assumed that the percentage change in the urban labor force as a result of migration during any period is governed by the differential between the discounted streams of expected urban and rural real income expressed as percentage of the discounted stream of expected rural real income; the planning horizon for each worker is identical; the fixed costs of migration are identical for all workers; and the discount factor is constant over the planning horizon and identical for all potential migrants. The model demonstrates the overall net impact of allowing these parameters to vary over time and/or choosing alternative values. It underlines in a simple and plausible way the interdependent effects of industrial expansion productivity growth and the differential expected real earnings capacity of urban versus rural activities on the size and rate of increase in labor migration and therefore ultimately on the occupational distribution of the urban labor force. Possibly the most significant policy implication that emerged from the model is the great difficulty of substantially reducing the size of the urban traditional sector without a concentrated effort at making rural life more attractive.
2,889 citations
"Migration unemployment and developm..." refers background in this paper
...A sufficient condition for 4?NM to be negative (making dNA/dNM positive) is for the wage elasticity of employment to be less than one, a situation which recent empirical studies suggest is likely to exist (see Erickson, Harris and Todaro (1969), and Katz)....
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...16 See Harris and Todaro (1969) for an analysis of the T'anzanian program....
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194 citations
TL;DR: In this paper, Manoilesco, Viner, and Haberler present the empirical evidence for economic growth and wage differentials in the one-factor and two-factor cases.
Abstract: I. Introduction, 496; Manoilesco, Viner, and Haberler, 496; the argument of this paper, 497. — II. The empirical evidence, 498; economic growth and wage differentials, 498; the data, 499; are the differences real? 503. — III. The analytical model, 504; the one-factor case, 504; the two-factor case, 505; extensions and qualifications, 511. — IV. Empirical corollary; protectionism and growth, 513.
123 citations
Journal Article•
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