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.