Chapter 7

Urbanization and
Rural-Urban
Migration: Theory
and Policy

Copyright © 2009 Pearson Addison-Wesley. All rights reserved.

The Migration and Urbanization
Dilemma
• Urbanization: trends and projections

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-2

Figure 7.1 Urbanization and Per
Capital Income in Selected Countries

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-3

Figure 7.2 Urbanization across
Time and Income Levels

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-4

Figure 7.3 Proportion of Urban
Population by Region, 1950-2030

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-5

Figure 7.4 Megacities: Cities with
Ten Million or More Inhabitants

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-6

Figure 7.5 Estimated and Projected Urban
and Rural Population of the More and Less
Developed Regions, 1950-2030

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-7

Figure 7.6 Annual Growth of Urban
and Slum Populations, 1990-2001

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-8

The Role of Cities

• Agglomeration economies, Urbanization

economies, Localization economies
• Industrial districts
• Efficient urban scale

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-9

The Urban Giantism Problem

• First- city bias

• Causes of Urban Giantism

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-10

Table 7.1 Population of the Largest
and Second-Largest Cities in Selected
Countries (millions)

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-11

Figure 7.6 Annual Growth of Urban
and Slum Populations, 1990-2001

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-12

The Urban Informal Sector

• Importance of the informal sector in

developing economies
• Policies for the Urban Informal Sector
• Women in the Informal Sector

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-13

Figure 7.8 Importance of Informal
Employment in Selected Cities

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-14

Figure 7.9 Youth Unemployment
Rates, 1995 and 2005

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-15

Migration and Development

• Rural-to-urban migration was viewed

positively until recently
• The current view is that this migration is
greater than the urban areas’ abilities to
– Create jobs
– Provide social services

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-16

Figure 7.10 Components of
Migration in Selected Countries

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-17

Toward an Economic Theory of
Rural-Urban Migration
• A verbal description of the Todaro model
– Migration is a rational decision
– The decision depends on expected rather than actual
wage differentials
– The probability of obtaining a city job is inversely related
to the urban unemployment rate
– High rates of migration are outcomes of rural urban
imbalances
• A Diagrammatic Presentation

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-18

Figure 7.11 Schematic Framework for
Analyzing the Rural-to-Urban Migration
Decision

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-19

Figure 7.12 The Harris-Todaro
Migration Model

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-20

Toward an Economic Theory of
Rural-Urban Migration

LM
WA  (W M )
LUS
Where
WA is agricultural income,
LM is employment in manufacturing
LUS is total urban labor pool
WM is the urban minimum wage

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-21

Toward an Economic Theory of
Rural-Urban Migration
• Five Policy Implications
– Reduction of urban bias
– Imbalances in expected income opportunities is crucial
– Indiscriminate educational expansion fosters increased
migration and unemployment
– Wage subsidies and scarcity factor pricing can be
counterproductive
– Programs of integrated rural development should be
encouraged

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-22

A Comprehensive Migration
and Employment Strategy
• Create a urban-rural balance
• Expand small, labor intensive industries
• Eliminate factor-price distortion
• Choose appropriate technologies
• Modify the linkage between education and
employment
• Reduce population growth
• Decentralize authority

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-23

Case Study: India

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-24

Case Study: Botswana

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-25

Concepts for Review

• Agglomeration • Present value

externalities • Rural-urban migration
• Congestion • Social capital
• Efficiency wage • Todaro migration model
• Expected income • Urban bias
• Induced migration • Urbanization economies
• Informal sector • Wage subsidy
• Labor turnover
• Localization economies

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 7-26