CHAPTER SIX

URBANIZATION AND RURAL-URBAN MIGRATION

6.1. Migration and Urbanization Dilemma

The positive association between urbanization and per capita income is one of the most obvious and
striking “stylized” facts of the development process. Generally, the more developed the country,
measured by per capita income, the greater the share of population living in urban areas. Given the
definition that “a certain place is said to be urban if in which there are large number of closely related
people (i.e. more than 2500) per square miles”, urbanization seems to be positively associated with per
capita income. The empirical investigation regarding such a phenomenon is represented using the
following figure.

Per capita income

. Developed Cs (eg. Denmark)

. LDCs (eg. Rwanda)

0 Level of urbanization

Fig. 6.1 The association between urbanization and per capita income in terms of cross-sectional data

Figure 6.1 shows that most of the developed countries are located at the right top corner with relatively
higher per capita income and higher level of urbanization where as LDCs are located in the left bottom
corner with relatively lower per capita income and lower level of urbanization. This is likely to reveal
that urbanization and per capita income are positively associated in terms of cross-sectional data
analysis.

However, empirical time serious analyses reveal that this may not be true in the case of LDCs. In LDCs,
urbanization takes place even when there is negative or no improvements in their per capita income due
to higher rate of rural-urban migration without the absorption capacity of the urban areas. It is observed
that urban areas of LDCs are characterized by the existence of higher rate of unemployment and
problem of lack of sufficient necessary facilities.

Empirical evidences also show that the rate of urbanization of LDCs is much higher than that of the
developed countries (at their early stage of development) for the fact that there exist higher rate of
rural-urban migration in LDCs. This reflects urbanization takes place in LDCs mostly in the sense of
population agglomeration (concentration) in a given area. If we stick to other definitions of urbanization
which is reflected by its important features such as the presence of industrial modernization,
technological sophistication and metropolitan growth, there seems only smaller rate of urbanization in
LDCs. This implies, therefore, urbanization in the sense of rural-urban migration only does not
necessarily reflect economic growth or development.

6.2. Migration and Development

Rural-urban migration was once viewed favorably in economic development literature. Internal
migration was thought to be a natural process in which surplus labor was gradually withdrawn from the
rural sector to provide needed man power for urban industrial growth. The process was deemed socially
beneficial because human resources were being shifted from locations where their social marginal
product was assumed to be zero to places where this marginal product was not only positive but also
rapidly growing as a result of capital accumulation and technological progress.

In contrast to this view point, it is now abundantly clear from recent LDC experience that rates of rural-
urban migration continue to exceed rates of urban job creation and to surpass greatly the absorption
capacity of both industry and urban social services. Today, migration, particularly to LDC cities, must be
seen as the major factor contributing to the ubiquitous phenomenon of urban surplus labor, as a force
that continues to exacerbate already serious urban unemployment problems caused by economic and
structural imbalances between urban and rural areas.

Migration exacerbates these rural-urban structural imbalances in two direct ways. First, on the supply
side, internal migration disproportionately increases the growth rate of urban job seekers relative to
urban population growth because of the high proportion of well-educated young people in the
migration system. Their presence tends to swell the urban labor supply while depleting the rural job
countryside of valuable human capital. Second, on the demand side, urban job creation is generally
more difficult & costly to accomplish than rural job creation because of the need for substantial
complementary resource inputs for most jobs in the industrial sector. Together this rapid supply
increase and lagging demand growth tends to convert a short-run problem of resource imbalances to
long-run situation of chronic and rising urban surplus labor. Hence, we must recognize that migration in
excess of job opportunities is both a symptom of and a contributor to under development.

 Therefore, nowadays, the major concern is to figure out the major motivational factors
(determinants) of rural-urban migration even if the aforementioned urban problems exist in
LDCs.

6.3. Theory of Rural-Urban Migration

A) Verbal Description of Todaro’s model

According to Todaro, rural-urban migration is a natural process for the fact that people are rational in
deciding to migrate from the rural to urban areas through their diagnosis of expected income from the
urban areas compared to their certain income from the rural areas. Their decision of migration is
determined as follows:
Consider that Wr is an income generated in rural area certainly and W u is an income generated in the
urban area if an individual is employed. Thus, expected income in the urban area is stated as:

E = P(Wu) ; where P is the probability of getting a job in the urban area

the nuber of jobs available ∈the urban area( J )

Note that, P=
the number of people seeking the job∈urban area( N )

J
This implies, E = (Wu)
N

If E > Wr, the individual decides to migrate

If E < Wr, the individual decides to stay in the rural area

If E = Wr, the individual will be indifferent to stay in the rural area or to migrate to the urban area

B) Diagrammatic Presentation of Harris-Todaro Model

Existence of unemployment in urban areas of LDCs resulting from rural-urban migration can be
represented using diagrammatic presentation of Harris-Todaro’s model. Assume that there are only two
sectors, rural agricultural and urban manufactured. The demand for labor (the marginal product of labor
curve) in agriculture is given by the negatively sloped line AA’. Labor demand in manufacturing is given
by MM’. The total labor force is given by O AOM. In a neoclassical, flexible wage, full employment market
economy, the equilibrium wage would be established at W A = WM with OALA workers in agriculture and
OMLM workers employed in urban manufacturing. All available workers are therefore employed.

A M

q’

Z W M’

W A’ q

WA WM

WA’’ M’ A’

OA LA’ LALM LM’ OM

LUS
Fig. 6.2. The Harris-Todaro Migration Model

But, what if urban wages are institutionally determined as at a level W M? If, for the moment, we
continue to assume that there is no unemployment, O MLM’ workers would get urban jobs, and the rest,
OALM, would settle for rural employment at O AWA’’ wages. If rural workers were free to migrate, then
despite the availability of only O MLM’ jobs, they are willing to take their chances in the urban job lottery.
If their chance of securing one of these favored jobs is expressed by the ratio of employment in
manufacturing, LM’, to the total urban labor pool, LUS, then the expression

LM '
W A' = (W M ' )
Lus

shows the probability of urban job success necessary to equate agricultural income W A’ with urban
expected income, LM’/LUS, thus causing a potential migrant to be indifferent between job locations. The
locus of these points of indifference is given by the qq curve in fig 6.2. The new unemployment
equilibrium now occurs at point Z where the urban-rural actual wage gap is W M’ – WA’. OALA’ workers are
still in the agricultural sector, and O MLM’ workers have modern formal sector jobs paying W M’ wages. The
rest, OMLA’ – OMLM’ are either unemployed or engaged in low-income informal sector activities. This
explains the existence of urban unemployment and private economic rationality of continued rural-
urban migration despite this unemployment. However, it may privately rational from a cost-benefit
perspective for an individual to migrate to the city despite high unemployment; it can be socially very
costly.

Five Policy Implications of the Harris-Todaro Model

 Imbalances in urban-rural employment opportunities caused by the urban bias of development

strategies must be reduced
 Urban job creation is an insufficient solution for the urban unemployment problem
 Indiscriminate educational expansion will lead to further migration and unemployment
 Wage subsidies and traditional scarcity factor pricing can be counter productive
 Programs of integrated rural development should be encouraged