Migration and the wage and unemployment gaps between urban and non-urban sectors: A dynamic general equilibrium reinterpretation of the Harris-Todaro equilibrium
AbstractThis paper offers a dynamic general equilibrium reinterpretation of the static partial migration equilibrium by Harris and Todaro [Harris, J., Todaro, M., 1970. Migration, unemployment and development; a two-sector analysis. American Economic Review 60, 126-142], under (i) flexible urban and rural wages and (ii) free mobility of workers and free entry of firms. The proposed model accounts for the set of stylized facts in developing countries: rural to urban migration and higher urban wages and unemployment. The model allows us to view the wage gap as a compensating differential for the negative amenities associated with job destruction and subsequent costly search on the consumption side, which can also be seen as a match-specific premium based on a sectoral productivity differential on the production side. Our model predicts the comovements among urban and non-urban wages and migration flows to the urban sector, an empirical regularity observed over the urbanization process of developing economies. Finally, we also conduct a welfare analysis.
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Bibliographic InfoArticle provided by Elsevier in its journal Labour Economics.
Volume (Year): 15 (2008)
Issue (Month): 6 (December)
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Web page: http://www.elsevier.com/locate/labeco
J31 J61 J64 Migration Urban vs. non-urban wage and unemployment gaps Matching Equilibrium unemployment Compensating wage differential Welfare;
Find related papers by JEL classification:
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
- Mig - Business Administration and Business Economics; Marketing; Accounting - - - - -
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- Mat - Business Administration and Business Economics; Marketing; Accounting - - - - -
- Equ - Macroeconomics and Monetary Economics - - - - -
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- Com - Mathematical and Quantitative Methods - - - - -
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