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Migration, Frictional Unemployment, and Welfare-Improving Labor Policies

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  • Yasuhiro Sato

Abstract

Studies have suggested that there exists job search and recruiting friction in urban areas. This paper constructs a two-sector (rural and urban) model involving this factor and investigates how it affects migration and what the optimal policies should be. An analysis shows that frictional urban unemployment brings about intersector wage differentials and that an economy almost always has distortion in the absence of government intervention. Tax and subsidy policies that remove the distortion are explored. Setting urban wages appropriately is also shown to attain the optimum. Finally, we explore the criterion to judge whether changing urban wages as a policy, such as the minimum wage law, enhances social welfare. Copyright Blackwell Publishing, Inc. 2004

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Regional Science.

Volume (Year): 44 (2004)
Issue (Month): 4 ()
Pages: 773-793

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Handle: RePEc:bla:jregsc:v:44:y:2004:i:4:p:773-793

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Cited by:
  1. Zenou, Yves, 2008. "Job search and mobility in developing countries. Theory and policy implications," Journal of Development Economics, Elsevier, vol. 86(2), pages 336-355, June.
  2. Zenou, Yves, 2010. "Search, Migration, and Urban Land Use: The Case of Transportation Policies," IZA Discussion Papers 5312, Institute for the Study of Labor (IZA).
  3. Mahreen Mahmud & Tareena Musaddiq & Farah Said, 2010. "Internal Migration Patterns in Pakistan—The Case for Fiscal Decentralisation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 593–607.
  4. Backlund, Kenneth & Sjögren, Tomas & Stage, Jesper, 2008. "Optimal Tax and Expenditure Policy in the Presence of Migration - Are Credit Restrictions Important?," UmeÃ¥ Economic Studies 749, Umeå University, Department of Economics.
  5. M. Ali Khan, 2007. "The Harris-Todaro Hypothesis," Labor Economics Working Papers 22206, East Asian Bureau of Economic Research.
  6. Zenou, Yves, 2005. "The Todaro Paradox Revisited," IZA Discussion Papers 1861, Institute for the Study of Labor (IZA).
  7. Lall, Somik V. & Selod, Harris & Shalizi, Zmarak, 2006. "Rural-urban migration in developing countries : a survey of theoretical predictions and empirical findings," Policy Research Working Paper Series 3915, The World Bank.
  8. Nicoletta Batini & Young-Bae Kim & Paul Levine & Emanuela Lotti, 2009. "Informal Labour and Credit Markets: A Survey," School of Economics Discussion Papers 0609, School of Economics, University of Surrey.
  9. Pierrard, Olivier, 2008. "Commuters, residents and job competition," Regional Science and Urban Economics, Elsevier, vol. 38(6), pages 565-577, November.
  10. Lee, Chul-In, 2008. "Migration and the wage and unemployment gaps between urban and non-urban sectors: A dynamic general equilibrium reinterpretation of the Harris-Todaro equilibrium," Labour Economics, Elsevier, vol. 15(6), pages 1416-1434, December.
  11. Wayne Edwards & Lee Huskey, 2008. "Job search with an external opportunity: an experimental exploration of the Todaro Paradox," The Annals of Regional Science, Springer, vol. 42(4), pages 807-819, December.

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