Urbanization in ME & NA

Urbanization and Development Economic development causes urbanization There is a positive correlation with economic development and urban population growth

Urbanization Many ME & NA countries experience rapid urban population growth because of Natural increase: birth rate > death rate Rural-urban migration: movement of rural workers to urban areas

Contribution of R-U Migration On average, about 50% of urban population growth is due to R-U migration Rapid R-U migration has resulted in the construction of slumps and shanty towns that house a large percentage of urban population (e.g., Cairo)

The Lewis Development Model Rural agricultural sector Low or even zero Marginal Product of Labor so that labor is a redundant factor and wage rate is at the subsistence level Urban industrial sector Rising demand for unskilled labor to be trained for industrial growth results in greater employment and more profits and higher wages Rural-Urban migration To find jobs and earn higher wages

Demand for Labor WU SR WR DU2 DU1 E1 E2 Wage R: Rural U: Urban W: Wage E: Employment D: Labor Demand S: Labor Supply Profit WU SR Investment in urban areas increases the demand and employment for rural labor. WR Wage DU2 DU1 E1 E2 Employment

Criticisms of Lewis Model Industrial technology is generally capital intensive/labor-saving. Hence, the demand for unskilled rural labor would not increase employment Industrialization must be supported by agricultural development to supply an ever-increasing supply of food items and raw materials

Demand for Labor No increase in employment when Wage No increase in employment when technology is labor saving Profit SR WU WR Wage DU1 DU2 E1 = E2 Employment

Todaro’s R-U Migration Model Factors affecting migration decision Expected urban income Probability of finding an urban job Cost of living in urban areas Decision criterion: Migration will take place if the “expected” benefits exceed the costs (in present value)

Todaro’s Framework of Migration Decision

Todaro’s R-U Migration Model Benefits from migration: Difference between “expected” urban income and rural income (R-U wage differential) Psychic benefits Costs of migration: Transportation cost Opportunity cost of being unemployed Difference in living expenses Psychic costs

Todaro’s R-U Migration Model Non-economic factors inducing migration: Distance City lights: movie theaters, restaurants, etc. Relative living in urban areas helping reduce living expenses Information flow about job openings in the “informal” sector

Policies Inducing R-U Migration Neglect of agriculture Urban bias development strategies Job creation in urban areas Educational opportunities: R-U brain drain Urban wage subsidies

Policies Reducing R-U Migration Eradicate poverty and reduce population growth Promote rural and agricultural development Expand small-scale, labor-intensive industries Eliminate factor-price distortions and adopt “appropriate” production technologies Modify direct link between education and employment

Rapid Urbanization Problems Congestion and pollution Unemployment and underemployment Overcrowding and crime Insufficient accommodation such as housing and transportation Possibility of political unrest