Chapter 7 Urbanization and Migration Economic Development of Asia

Urbanization and Migration As the economy develops, population moves from rural to urban area Lewis’s Model-Agricultural worker with zero marginal productivity move, so urbanization results in positive gain Strain on urban areas population concentrates in cities sanitary conditions, health facilities infrastructure problems schooling and education housing shortage and higher prices lower standard of living

Todaro’s Migration Model Decision to migrate is based on urban-rural differences in expected earnings, rather than actual earnings. Refer to chart 7.11 on page 346 A worker will migrate to the urban area if Net present value takes care of cost of migration Cost of migration -Opportunity cost -Transportation cost -Cost of living differential -Psychological cost (risk, social and cultural adjustment) Present value of the net stream of expected urban income over the planning horizon Expected rural income >

Level of Unemployment Level of urban unemployment affects expected urban income based on the probability of finding a job The interesting result of the migration model with less than full employment is that migration can continue despite the sizable rate of urban unemployment

Policy Implications 1.Imbalances between urban-rural employment opportunities must be reduced 2.Urban job creation is an insufficient solution for the urban employment problem Migration responds to expected incomes and probability of finding a job. Higher employment level in urban area leads to higher P of finding a job, more migration and more urban unemployment.

Policy Implications 3. Indiscriminate educational expansion may also lead to more migration and more urban unemployment In the face of high unemployment, employers may require higher and higher education as a rationing device workers go for higher and higher education 4. Wage subsidies to employers is also counter productive 5. Programs of integrated rural development must be encouraged policies that regulate supply of labor to urban areas will be more effective

Read page and list 5 different ways of achieving urban-rural balance and rural development