The Todaro Paradox Revisited
The Todaro Paradox states that policies aimed at reducing urban unemployment are bound to backfire: they will raise rather than reduce urban unemployment. The aim of this paper is to reexamine this paradox in the context of efficiency wage and search-matching models. For that, we study a policy that consists in decreasing the urban unemployment benefit. In an efficiency wage model, we find that there is no Todaro paradox while this is not always true in a search-matching model since a decrease in the urban unemployment benefit can increase both urban employment and unemployment.
|Date of creation:||09 Nov 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Coulson, N Edward & Laing, Derek & Wang, Ping, 2001. "Spatial Mismatch in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 949-72, October.
- Moene, Karl Ove, 1988. "A reformulation of the Harris-Todaro mechanism with endogenous wages," Economics Letters, Elsevier, vol. 27(4), pages 387-390.
- Fields, Gary S., 1989. "On-the-job search in a labor market model : Ex ante choices and ex post outcomes," Journal of Development Economics, Elsevier, vol. 30(1), pages 159-178, January.
- Fields, Gary S., 1975. "Rural-urban migration, urban unemployment and underemployment, and job-search activity in LDCs," Journal of Development Economics, Elsevier, vol. 2(2), pages 165-187, June.
- Christopher A. Pissarides & Barbara Petrongolo, 2001.
"Looking into the Black Box: A Survey of the Matching Function,"
Journal of Economic Literature,
American Economic Association, vol. 39(2), pages 390-431, June.
- Petrongolo, Barbara & Pissarides, Christopher, 2000. "Looking Into The Black Box: A Survey Of The Matching Function," CEPR Discussion Papers 2409, C.E.P.R. Discussion Papers.
- Barbara Petrongolo & Christopher Pissarides, 2000. "Looking into the black box: a survey of the matching function," LSE Research Online Documents on Economics 2122, London School of Economics and Political Science, LSE Library.
- Barbara Petrongolo & Christopher A. Pissarides, 2000. "Looking Into the Black Box: A Survey of the Matching Function," CEP Discussion Papers dp0470, Centre for Economic Performance, LSE.
- ZENOU, Yves & SMITH, Tony E., 1994.
"Efficiency Wages, Involuntary Unemployment and Urban Spatial Structure,"
CORE Discussion Papers
1994076, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Zenou, Yves & Smith, Tony E., 1995. "Efficiency wages, involuntary unemployment and urban spatial structure," Regional Science and Urban Economics, Elsevier, vol. 25(4), pages 547-573, August.
- Zenou, Y. & Smith, T. E., . "Efficiency wages, involuntary unemployment and urban spatial structure," CORE Discussion Papers RP -1171, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
- William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
- Mortensen, Dale T. & Pissarides, Christopher A., 1999.
"New developments in models of search in the labor market,"
Handbook of Labor Economics,
in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627
- Mortensen, Dale T & Pissarides, Christopher, 1999. "New Developments in Models of Search in the Labour Market," CEPR Discussion Papers 2053, C.E.P.R. Discussion Papers.
- Neal, Derek, 1993. "Supervision and Wages across Industries," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 409-17, August.
- Yasuhiro Sato, 2004. "Migration, Frictional Unemployment, and Welfare-Improving Labor Policies," Journal of Regional Science, Wiley Blackwell, vol. 44(4), pages 773-793.
- Ortega, Javier, 2000. "Pareto-Improving Immigration in an Economy with Equilibrium Unemployment," Economic Journal, Royal Economic Society, vol. 110(460), pages 92-112, January.
- Mohtadi, Hamid, 1989. "Migration and job search in a dualistic economy : A Todaro-Stigler synthesis," Economics Letters, Elsevier, vol. 29(4), pages 373-378.
- Stiglitz, Joseph E, 1976. "The Efficiency Wage Hypothesis, Surplus Labour, and the Distribution of Income in L.D.C.s," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 185-207, July.
- Devine, Theresa J. & Kiefer, Nicolas M., 1991. "Empirical Labor Economics: The Search Approach," OUP Catalogue, Oxford University Press, number 9780195059366, March.
- Stiglitz, Joseph E, 1974. "Alternative Theories of Wage Determination and Unemployment in LDC'S: The Labor Turnover Model," The Quarterly Journal of Economics, MIT Press, vol. 88(2), pages 194-227, May.
- Arellano, Jose-Paulo, 1981. "Do more jobs in the modern sector increase urban unemployment?," Journal of Development Economics, Elsevier, vol. 8(2), pages 241-247, April.
- Brueckner, Jan K, 1990. "Analyzing Third World Urbanization: A Model with Empirical Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 38(3), pages 587-610, April.
- Stark, Oded & Ranjan Gupta, Manash & Levhari, David, 1991. "Equilibrium urban unemployment in developing countries : Is migration the culprit?," Economics Letters, Elsevier, vol. 37(4), pages 477-482, December.
- Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
- 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.
- Raimondos, Pascalis, 1993. "On the Todaro paradox," Economics Letters, Elsevier, vol. 42(2-3), pages 261-267.
- Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
- Blomqvist, A. G., 1978. "Urban job creation and unemployment in LDCs : Todaro vs. Harris and Todaro," Journal of Development Economics, Elsevier, vol. 5(1), pages 3-18, March.
- 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.
- Banerjee, Biswajit, 1984. "Information flow, expectations and job search : Rural-to-urban migration process in India," Journal of Development Economics, Elsevier, vol. 15(1-3), pages 239-257.
- Zarembka, Paul, 1970. "Labor Migration and Urban Unemployment: Comment," American Economic Review, American Economic Association, vol. 60(1), pages 184-86, March.
When requesting a correction, please mention this item's handle: RePEc:hhs:iuiwop:0652. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elisabeth Gustafsson)
If references are entirely missing, you can add them using this form.