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Rural-to-Urban Migration, Human Capital, and Agglomeration

  • Stark, Oded
  • Fan, C. Simon

A new general-equilibrium model that links together rural-to-urban migration, the externality effect of the average level of human capital, and agglomeration economies shows that in developing countries, unrestricted rural-to-urban migration reduces the average income of both rural and urban dwellers in equilibrium. Various measures aimed at curtailing rural-to-urban migration by unskilled workers can lead to a Pareto improvement for both the urban and rural dwellers. In addition, the government can raise social welfare by reducing the migration of skilled workers to the city. Moreover, without a restriction on rural-to-urban migration, a government’s efforts to increase educational expenditure and thereby the number of skilled workers may not increase wage rates in the rural or urban areas.

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File URL: http://purl.umn.edu/7116
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Paper provided by University of Bonn, Center for Development Research (ZEF) in its series Discussion Papers with number 7116.

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Date of creation: 2007
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Handle: RePEc:ags:ubzefd:7116
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