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Social influence, agent heterogeneity and the emergence of the urban informal sector

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  • García-Díaz, César
  • Moreno-Monroy, Ana I.

Abstract

We develop an agent-based computational model in which the urban informal sector acts as a buffer where rural migrants can earn some income while queuing for higher paying modern-sector jobs. In the model, the informal sector emerges as a result of rural–urban migration decisions of heterogeneous agents subject to social influence in the form of neighboring effects of varying strengths. Besides using a multinomial logit choice model that allows for agent idiosyncrasy, explicit agent heterogeneity is introduced in the form of socio-demographic characteristics preferred by modern-sector employers. We find that different combinations of the strength of social influence and the socio-economic composition of the workforce lead to very different urbanization and urban informal sector shares. In particular, moderate levels of social influence and a large proportion of rural inhabitants with preferred socio-demographic characteristics are conducive to a higher urbanization rate and a larger informal sector.

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Bibliographic Info

Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

Volume (Year): 391 (2012)
Issue (Month): 4 ()
Pages: 1563-1574

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Handle: RePEc:eee:phsmap:v:391:y:2012:i:4:p:1563-1574

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Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

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Keywords: Agent-based modeling; Rural–urban migration; Adaptation and self-organizing systems; Physics and society;

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  12. Tokman, Victor E., 1978. "An exploration into the nature of informal--formal sector relationships," World Development, Elsevier, vol. 6(9-10), pages 1065-1075.
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