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Rural Urban Interaction And Migration Notes

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RURAL URBAN INTERACTION AND MIGRATION 'Development Economics' Ray 1998 (Ch. 10)

'As economic development proceeds, individuals move from rural to urban areas, agriculture acts as a supplier of labour to industry'

The Lewis Model o The Dual Economy
 Surplus labour from 'traditional' to 'modern' sector

Can be removed at little or no opp. Cost

Why is surplus labour important?
o Urban workers still want food!
o May ↑work effort.

Rural urban migration 'Leading issues in economic development' Meier & Rauch 2000

Economic development with unlimited supplies of labour o Population so large relative to capital and resources
 MPL is negligible or even -ve o 'disguised' use in agricultural sector o 'each trader makes only a few sales; markets are crowded with stalls, and if the number of stalls were greatly ↓the consumers would be no whit worse off'

↑labour force?
o 'one of the surest ways of ↑the national income is therefore to create new sources of employment for women outside the home' o ↑population as a result of births > deaths o Use generated by ↑efficiency
 BUT doesn't seem to have occurred

'A 70% urban real wage premium for example, might be of little consequence to the prospective migrant if his chances of actually securing a job are, say, one in fifty' o Although may still be economically rational in the long run.

Lewis suggests that wages remain constant: o This means that earnings of owners of capital equipment would not be ↓by ↑wages, and he believed that these earnings were the main source of savings that would finance further investment and drive economic growth.

With H-T model there is no subsistence wage.

Jamaica: o Distorted wage structure - workers of same skill level receive different wages in different industries. o 'many of the u/e, though by no means all, may be better off than those fully employed in the low wage sector.' o 98% of heads of household wanting work were u/e o u/e level in sending areas was +vely (and sig.) associated with migration
 'migration occurs largely in response to wage differentiation and in spite of higher u/e levels in high wage areas.'

wage↑ in high wage areas of 10%↑rate of migration by 30%

So, why does comparatively prosperous and rapidly growing Jamaica seemingly have more u/e than poor and stagnant Haiti?
o 'the larger the high wage modern sector, the more u/e an economy can afford to support.'

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