Post on 12-Jul-2015
Toward an Economic Theory of Rural-
Urban Migration
A verbal Description of the Todaro
Model
A Diagrammatic Presentation
Topics under discussion:
Toward an Economic
Theory of Rural-Urban
Migration
How did western Europe and
United States developed?
Answer: Through rural and
urban migration, both
domestically and
internationally.
Lewis two-sector model of development:
All the surplus labor which migrates to the
industrialized area is totally absorbed and
development process occurs.
Criticism!
It does not explain the
unemployment and
underemployment
phenomenon created by
migration.
Todaro Model explains this phenomenon
further.
A verbal Description
of the Todaro Model.
Todaro Model:
• A rational process in spite of
unemployment in cities.
• Expected income is being compared.
Expected income in cities Average rural income
MIGRATION occurs
Expected incomes
are compared
rather than actual
earnings.
Existence of two
possibilities when
a person migrates:
FULL employment
NEAR-FULL employment
FULL employment:
• Secure a highly paid
job where ever it is
available.
• Reduction in wage
differentials because
supply and demands
are fulfilled .
NEAR-FULL
employment:
It causes
underemployment
because desired
jobs are not
available.
The unskilled or uneducated people get
the job in informal sector such as
repairman, electrician and mechanic etc.
If the migrants are between the age of
15-25 then the decision to migrate
should be represented on the basis of
longer term, more permanent income
calculation.
Expected incomes are compared:
If the income of the migrant is less in the starting
time horizon but the chances to get a higher income
than the present rural income then the decision to
migrate is a rational decision.
• A 50% of urban unemployment rate would be
necessary before further migration would no
longer be profitable.
A diagrammatic
presentation
WAGE DIFFERENTIALS & EMPLOYMENT
7-21
Agricultural Wage Rate Manufacturing Wage Rate
WM
W*MW*A
WA
W**A
q’
q E
M
M’
A
A’
OA LA L*A=L*M LM OM
At WM, OMLM is urban employment and OALA
is rural employment. LALM is the “migrant pool:
Those who are either unemployed or engaged in
low-skilled activities in informal sector
TOWARD AN ECONOMIC THEORY OF
RURAL-URBAN MIGRATION
7-22
)( M
US
MA W
L
LW
Where
WA is agricultural income,
LM is employment in manufacturing
LUS is total urban labor pool
WM is the urban minimum wage
• There are higher chances of an
educated rural person to secure a
highly paid job.
• William , Enrica and Tara Vishwanath
proposed a model in which they
explained that the people who
migrate from rural areas help the
people who migrate from their area to
settle in the city.
Harris Todaro model:
Summary:
• Migration is stimulated primarily by
rational economic consideration of
relative benefits and costs, mostly
financial but also psychological.
• The decision to migrate depends on
expected rather than actual rural urban
real wage.