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

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

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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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
Contact details of provider: Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

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