Rural–Urban Migration And Unemployment: Theory And Policy Implications
AbstractWe develop a regional model where, in the city, unemployment prevails because of too high (efficiency) wages, while, in the rural area, workers are paid at their marginal productivity. We characterize the steady-state equilibrium and show that it is unique. We then consider two policies: decreasing urban unemployment benefits and subsidizing urban employment. We find that decreasing the unemployment benefit in the city creates urban jobs and reduces rural-urban migration since new migrants have to spend some time unemployed before they can find a job in the city. On the other hand, raising employment subsidies increases urban employment but may also increase urban unemployment because it triggers more rural-urban migration. In this respect, the employment subsidy policy can backfire by raising rather than reducing urban unemployment.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Regional Science.
Volume (Year): 51 (2011)
Issue (Month): 1 (02)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-4146
Other versions of this item:
- Zenou, Yves, 2010. "Rural-Urban Migration and Unemployment: Theory and Policy Implications," CEPR Discussion Papers 8123, C.E.P.R. Discussion Papers.
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
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