Chapter 7

Report
Chapter 7
Urbanization and
Rural-Urban
Migration: Theory
and Policy
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The Migration and Urbanization
Dilemma
• Urbanization: trends and projections
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Figure 7.1 Urbanization and Per
Capital Income in Selected Countries
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Figure 7.2 Urbanization across
Time and Income Levels
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Figure 7.3 Proportion of Urban
Population by Region, 1950-2030
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Figure 7.4 Megacities: Cities with
Ten Million or More Inhabitants
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Figure 7.5 Estimated and Projected Urban
and Rural Population of the More and Less
Developed Regions, 1950-2030
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Figure 7.6 Annual Growth of Urban
and Slum Populations, 1990-2001
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The Role of Cities
• Agglomeration economies, Urbanization
economies, Localization economies
• Industrial districts
• Efficient urban scale
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The Urban Giantism Problem
• First- city bias
• Causes of Urban Giantism
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Table 7.1 Population of the Largest and
Second-Largest Cities in Selected
Countries (millions)
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Figure 7.6 Annual Growth of Urban
and Slum Populations, 1990-2001
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The Urban Informal Sector
• Importance of the informal sector in
developing economies
• Policies for the Urban Informal Sector
• Women in the Informal Sector
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Figure 7.8 Importance of Informal
Employment in Selected Cities
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Figure 7.9 Youth Unemployment
Rates, 1995 and 2005
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Migration and Development
• Rural-to-urban migration was viewed
positively until recently
• The current view is that this migration is
greater than the urban areas’ abilities to
– Create jobs
– Provide social services
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Figure 7.10 Components of
Migration in Selected Countries
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Toward an Economic Theory of
Rural-Urban Migration
• A verbal description of the Todaro model
– Migration is a rational decision
– The decision depends on expected rather than actual
wage differentials
– The probability of obtaining a city job is inversely related
to the urban unemployment rate
– High rates of migration are outcomes of rural urban
imbalances
• A Diagrammatic Presentation
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Figure 7.11 Schematic Framework for
Analyzing the Rural-to-Urban Migration
Decision
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Figure 7.12 The Harris-Todaro
Migration Model
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Toward an Economic Theory of
Rural-Urban Migration
WA 
LM
(W M )
L US
Where
WA is agricultural income,
LM is employment in manufacturing
LUS is total urban labor pool
WM is the urban minimum wage
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Toward an Economic Theory of
Rural-Urban Migration
• Five Policy Implications
– Reduction of urban bias
– Imbalances in expected income opportunities is crucial
– Indiscriminate educational expansion fosters increased
migration and unemployment
– Wage subsidies and scarcity factor pricing can be
counterproductive
– Programs of integrated rural development should be
encouraged
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A Comprehensive Migration
and Employment Strategy
•
•
•
•
•
Create a urban-rural balance
Expand small, labor intensive industries
Eliminate factor-price distortion
Choose appropriate technologies
Modify the linkage between education and
employment
• Reduce population growth
• Decentralize authority
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Case Study: India
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Case Study: Botswana
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Concepts for Review
• Agglomeration
externalities
• Present value
• Congestion
• Social capital
• Efficiency wage
• Todaro migration model
• Expected income
• Urban bias
• Induced migration
• Urbanization economies
• Informal sector
• Wage subsidy
• Rural-urban migration
• Labor turnover
• Localization economies
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