Urbanization and Rural-Urban Migration: Theory and Policyand Policy

AEB 4906Development Economicsp

http://danielsolis.webs.com/aeb4906.htm

The Migration and Urbanization Dilemma

Urbanization and city growth are caused by a number of different factors including:

rural–urban migration, natural population increase, and annexation.

Because rates of natural increase areBecause rates of natural increase are generally slightly lower in urban than in rural areas, the principal reasons for rising levels of urbanization are rural–urban migration, the geographic expansion of urban areas through

ti d th t f ti dannexations, and the transformation and reclassification of rural villages into small urban settlementsurban settlements.

The expansion of the metropolitan peripheryThe expansion of the metropolitan periphery can be caused both by the arrival of new migrants and by the sub-urbanization of the middle class out of the central city. The relative importance of each of these various causes of urbanization and suburbanization varies both within and between regions and countriesbetween regions and countries.

Urbanization across Time and Income lLevels

Proportion of Urban Population by iRegion, 1950-2030

Megacities: Cities with Ten Million or h biMore Inhabitants

7-8

Estimated and Projected Urban and Rural Population of the More and Less Developed Regions, 1950-of the More and Less Developed Regions, 19502030

7-9

Annual Growth of Urban and Slum l iPopulations, 1990-2001

7-10

The Role of CitiesThe Role of Cities

Cities are formed because they provide costCities are formed because they provide cost advantages to producers and consumers, This is called agglomeration economiesTwo types of agglomeration economies:

urbanization economies: the existence of industrial districts or clusters, facilitates technology spilloversl li ti i f t d ti ilocalization economies: refers to reduction in costs due to backward (inputs, skilled workers) and forward (transportation) linkagesand forward (transportation) linkages

Urban agglomerationsAdvantages

Advantages:• cost reductions due to

i f l d

Disadvantages:• social costs of

progressive overloadingeconomies of scale and proximity

• positive economic

progressive overloading of housing and social servicesp

externalities: skilled workers, cheap transport

• positive social

• increased crime• increased pollution• congestion costs: higher positive social

externalities: cultural amenities

g gcosts of real estate

The Urban Giantism ProblemThe Urban Giantism Problem

Problem: in developing countries, capital cities areProblem: in developing countries, capital cities are “urban giants” that suffer from enormous levels of congestion there are not adequate mid-sized cities t id lt ti l ti f ito provide alternative locations for economic growth.Causes:Causes:

1. inheritance of a colonial transportation system designed to extract natural resourcesg2. lack of appropriate government intervention to solve the “coordination failure”3 “fi t it bi ” di ti t bli3. “first city bias” disproportionate publicinvestment in capital cities

Population of the Largest and Second-Largest Ci i i S l d C i ( illi )Cities in Selected Countries (millions)

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Annual Growth of Urban and Slum P l i 1990 2001Populations, 1990-2001

7-15

The Urban Informal SectorThe Urban Informal Sector

Importance of the informal sector inImportance of the informal sector in developing economiesPolicies for the Urban Informal SectorWomen in the Informal Sector

Importance of Informal Employment in l d i iSelected Cities

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Youth Unemployment Rates, 1995 and 2005

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Migration and DevelopmentMigration and Development

Rural-to-urban migration was viewedRural to urban migration was viewed positively until recentlyThe current view is that this migration is ggreater than the urban areas’ abilities to

Create jobsProvide social services

Components of Migration in Selected iCountries

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Toward an Economic Theory of Rural-Urban Migration

A verbal description of the Todaro modelA verbal description of the Todaro modelMigration is a rational decisionThe decision depends on expected rather than p pactual wage differentialsThe probability of obtaining a city job is inversely related to the urban unemployment raterelated to the urban unemployment rateHigh rates of migration are outcomes of rural urban imbalances

A Diagrammatic Presentation

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Schematic Framework for Analyzing the R l U b Mi i D i iRural-to-Urban Migration Decision

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The Harris-Todaro Migration ModelThe Harris Todaro Migration Model

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Toward an Economic Theory of Rural-Urban Migration

)( MM

A WLLW =

USL

WhereWhereWA is agricultural income, LM is employment in manufacturingLM is employment in manufacturingLUS is total urban labor poolWM is the urban minimum wage

Toward an Economic Theory of Rural-b i iUrban Migration

Five Policy ImplicationsFive Policy ImplicationsReduction of urban biasImbalances in expected income opportunities is p ppcrucialIndiscriminate educational expansion fosters increased migration and unemploymentincreased migration and unemploymentWage subsidies and scarcity factor pricing can be counterproductivepPrograms of integrated rural development should be encouraged

A Comprehensive Migration and Employment Strategy

Create a urban-rural balanceExpand small, labor intensive industriesEliminate factor-price distortionpChoose appropriate technologiesModify the linkage between education and employmentReduce population growthD li h iDecentralize authority