1. Urbanization in ME & NA

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

3. 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

4. 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)

5. 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

6. 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

7. 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

8. 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

9. 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)

10. Todaro’s Framework of Migration Decision

11. 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

12. 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

13. 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

14. 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

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