MIGRATION AND DEVELOPMENT

2 ways Migration worsens rural-structural imbalances:

1. Supply Side - internal migration disproportionately increases the growth rate of urban job

seekers relative to urban population growth, which itself is at historically unprecedented

levels because of the high proportion of well-educated young people in the migrant

system

2. Demand Side - urban job creation is generally more difficult and costlier to accomplish

than rural job creation.

All economic policies have direct and indirect effects on the level and growth of urban or

rural incomes or both, they all will tend to influence the nature and magnitude of the migration

stream. There is thus a clear need to recognize the central importance of internal and, for many

countries, even international migration and to integrate the two-way relationship between

migration and population distribution on the one hand and economic variables on the other into a

more comprehensive framework designed to improve development policy formulation.

TOWARD AN ECONOMIC THEORY OF RURAL-URBAN MIGRATION

Todaro migration model

Todaro migration is a theory that explains rural-urban migration as an economically

rational process despite high urban unemployment and underemployment. Migrants calculates

(present value of) urban expected income (or its equivalent) and move if this exceeds average

rural income.
Harris-Todaro model

Harris- Todaro model is an equilibrium model of Todaro migration model that predicts

the incomes will be equated across rural and urban sectors when taking into account informal

sector activities and outright employment.

For: Focus the role of economic incentives in the decision of workers to migration from low-

opportunity area to high-opportunity area.

Sectors: 1. Rural 2. Urban

Assumption: 1. Visible unemployment in the urban area but not in rural area.

2. Every migrant from rural to urban will not find a job.

Comparison: Expected urban wage rate vs. expected rural wage rate

Starting from the assumption that migration is primarily an economic phenomenon,

which for the individual migrant can be a quite rational decision despite the existence of urban

unemployment, the Todaro model postulates that migration proceeds in response to urban-rural

differences in expected income rather than actual earnings. The fundamental premise is that

migrants consider the various labor market opportunities available to them in the rural and urban

sectors and choose the one that maximizes their expected gains from migration. In essence, the

theory assumes that members of the labor force, both actual and potential, compare their

expected incomes for a given time horizon in the urban sector (the difference between returns

and costs of migration) with prevailing average rural incomes and migrate if the former exceeds

the latter.
 Migration depends on two (2) things, first is difference between W u (Urban wage) and Wr

(Rural wage) , second is likelihood of getting a job. Thus, the expected urban wage (W ue) = pWu

(where p is the probability of getting a job). Now that p is nothing but a probability of getting a

job, we can rewrite it as “employment rate.” To get the unemployment we must know the Labor

force (Lu) and Employment rate (Eu).