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Rural Urban Migration Notes

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Pip Reeve DEMT10W3T3 Are high rates of migration from rural to urban areas and the fast growth of the informal sector in developing countries signs of failure or success?
The overall effect of rural-urban migration and the growth of the informal sector on economic growth is difficult to ascertain. It is also very difficult to collect empirical evidence to suggest whether this migration and growth of the informal sector are signs of failure and success. In this essay, I will list a number of possible causes, some of which are positive and some of which are negative. Overall, I believe that rural-urban migration is generally a sign of success and growth in the informal sector will lead to success in the right conditions. There are many possible causes of rural-urban migration. Some of these causes are as a result of positive factors which are likely to contribute to economic growth and migration in this sense can be seen as a success. On the other hand, some of these causes are as a result of negative factors and migration in this case may be seen as a failure. The Harris & Todaro model has two main predictions; a lower urban-rural wage differential will lead to a lower rate of migration and a higher perceived probability of finding a job in the modern sector will lead to a greater rate of migration. So, for example, the 'introduction or enforcement of a system of land property rights might act as a push factor.'1 Some workers will migrate as they have been displaced as a result of the property rights; some will migrate as they are now land owners and can therefore leave without fear of losing their assets. Property rights are generally regarded as a positive contributor to economic growth and so this type of migration can be seen as a sign of success. On the other hand, the 'absence of a rural credit market might act as a push factor.' 2 For example, a family member might migrate in order to generate remittances so that credit constraints can be overcome. However, in this case, a lack of credit markets is seen as a negative contributor to economic growth and so migration for this reason will be seen as a sign of failure. So, 'on the one hand, internal migration is a prerequisite for urbanisation, a phenomenon whose role has long been recognised as the key correlate accompanying economic growth.'3 On the other hand, it 'can exert a lot of pressure on cities who may not have the capacity to absorb large population flows and to provide migrants with an adequate level of public goods.'4If cities do lack the capacity, 'migration could involve negative externalities in the form of congestion, pollution in shanty towns etc.' 5 In this situation, migration, in the short run at least, would be a sign of failure in terms of increased negative economic externalities. Overall, I believe that the majority of causes which result in rural-urban migration are signs of success. I will discuss some of the main causes in more detail now, beginning with wage differentials and unemployment in the rural and urban sector. Migration is a main cause of the wage gap between the urban sector and the rural sector. This suggests that there is a high prevalence of income inequality within developing country. The agricultural, rural, sector has a higher level of poverty than the manufacturing, urban, sector in most cases. The formal urban sector pays a high wage to its workers for a number of reasons. Firstly, it is often highly unionized which allows collective bargaining to occur. Secondly, the government can intervene much more easily in this sector and so minimum wage laws, pension benefits and day care are much more likely to prevail. Thirdly, firms may deliberately pay a higher wage in order to meet a minimum food nutrition level for workers, to attract higher quality workers or to make being fired a serious punishment. Informal urban sector and rural sector have low wages that fluctuate according to supply and demand. This is because there is little or no unionization; government 1 'Rural-urban migration in developing countries' Lall, Seold & Shalizi 2006 2 'Rural-urban migration in developing countries' Lall, Seold & Shalizi 2006 3 'Rural-urban migration in developing countries' Lall, Seold & Shalizi 2006 4 'Rural-urban migration in developing countries' Lall, Seold & Shalizi 2006 5 'Migration theories and evidence' Ghatak, Levine & Wheatley Price

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