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What Draws People to Urban Growth Centers: Jobs vs. Pay?

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  • Sari Pekkala

Abstract

The present study analyses migration patterns in Finland to test if microeconomic evidence for the Harris-Todaro model can be found. The Harris-Todaro hypothesis states that rural-urban migration stems from regional differences in the wage level and the chances of finding work. To test the hypothesis one needs to predict urban and rural wage and employment probability for each individual. This method is applied to a study of the recent migratory trend in Finland in which most migrants are heading towards a few urban growth centers while the rest of Finland is losing its population. The present study finds evidence for the Harris-Todaro model and concludes that rural urban migration is a result of higher wages and, even more so, better employment prospects in urban areas. Demographic factors may serve to reduce the migration flows in future, but this reduction is likely to remain modest. The results suggest that the best way to prevent excessive rural population loss is to pay attention to job-creation schemes, concentrating especially on workers with secondary and tertiary education.

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Bibliographic Info

Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 310.

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Date of creation: 25 Jun 2003
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Handle: RePEc:fer:dpaper:310

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Related research

Keywords: Migration; growth center; Harris-Todaro model; human capital; wages; employment;

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  1. Jan K. Brueckner & Hyun-A Kim, 2001. "Land Markets in the Harris-Todaro Model: A New Factor Equilibrating Rural-Urban Migration," Journal of Regional Science, Wiley Blackwell, vol. 41(3), pages 507-520.
  2. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  3. Small, Kenneth A & Hsiao, Cheng, 1985. "Multinomial Logit Specification Tests," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 619-27, October.
  4. Karsten Albaek & Rita Asplund & Erling Barth & Stig Blomskog & Bjorn Runar Gudmundsson & Vifill Karlsson & Erik Strojer Madsen, 2000. "Dimensions of the Wage-Unemployment Relationship in the Nordic Countries: Wage Flexibility Without Wage Curves," Econometric Society World Congress 2000 Contributed Papers 1893, Econometric Society.
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  6. Todaro, Michael P., 1976. "Urban job expansion, induced migration and rising unemployment : A formulation and simplified empirical test for LDCs," Journal of Development Economics, Elsevier, vol. 3(3), pages 211-225, September.
  7. Tuomas Pekkarinen, 2001. "The wage curve : evidence from the Finnish metal industry panel data," Finnish Economic Papers, Finnish Economic Association, vol. 14(1), pages 51-60, Spring.
  8. Addison, John T & Portugal, Pedro, 1989. "Job Displacement, Relative Wage Changes, and Duration of Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 281-302, July.
  9. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
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  11. Brueckner, Jan K. & Zenou, Yves, 1999. "Harris-Todaro models with a land market," Regional Science and Urban Economics, Elsevier, vol. 29(3), pages 317-339, May.
  12. Cole, William E & Sanders, Richard D, 1985. "Internal Migration and Urban Employment in the Third World," American Economic Review, American Economic Association, vol. 75(3), pages 481-94, June.
  13. Arnott, Richard J & Gersovitz, Mark, 1986. "Social Welfare Underpinnings of Urban Bias and Unemployment," Economic Journal, Royal Economic Society, vol. 96(382), pages 413-24, June.
  14. Mincer, Jacob, 1978. "Family Migration Decisions," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 749-73, October.
  15. McCormick, Barry & Wahba, Jackline, 2000. "Did public wage premiums fuel agglomeration in LDCs?," Discussion Paper Series In Economics And Econometrics 0020, Economics Division, School of Social Sciences, University of Southampton.
  16. Krugman, Paul & Venables, Anthony J., 1990. "Integration and the Competitiveness of Peripheral Industry," CEPR Discussion Papers 363, C.E.P.R. Discussion Papers.
  17. Thomas Krichel & Paul Levine, 1997. "The Welfare Economics of Rural to Urban Migration: The Harris-Todaro Model Revisited," School of Economics Discussion Papers 9702, School of Economics, University of Surrey.
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