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Cities, Towns, and Poverty: Migration Equilibrium and Income Distribution in a Todaro-type Model with Multiple Destinations

Listed author(s):
  • Christiaensen, Luc

    ()

    (World Bank)

  • De Weerdt, Joachim

    ()

    (University of Antwerp)

  • Kanbur, Ravi

    ()

    (Cornell University)

Should public investment be targeted to big cities or to small towns, if the objective is to minimize national poverty? To answer this policy question we extend the basic Todaro-type model of rural-urban migration to the case of migration from rural areas to two potential destinations, secondary town and big city. We first derive conditions under which a poverty gradient from rural to town to city will exist as an equilibrium phenomenon. We then address the policy question and show how the answer depends on the migration response, where the poverty line lies relative to incomes in the three locations, and at times also the poverty index itself. In particular, we develop sufficient statistics for the policy decisions based on these income parameters and illustrate the empirical remit of the model with long running panel data from Kagera, Tanzania. Further, we show that the structure of the sufficient statistics is maintained in the case where the model is generalized to introduce heterogeneous workers and jobs. Overall, the findings confirm that, given migration responses, national poverty outcomes are not immune to whether urban employment generation takes place in the towns or the city.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 10692.

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Length: 24 pages
Date of creation: Apr 2017
Handle: RePEc:iza:izadps:dp10692
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  1. Basu, Arnab K. & Chau, Nancy & Fields, Gary S. & Kanbur, Ravi, 2016. "Job Creation in a Multi-Sector Labor Market Model for Developing Economies," IZA Discussion Papers 9972, Institute for the Study of Labor (IZA).
  2. Francisco H. G. Ferreira & Shaohua Chen & Andrew Dabalen & Yuri Dikhanov & Nada Hamadeh & Dean Jolliffe & Ambar Narayan & Espen Beer Prydz & Ana Revenga & Prem Sangraula & Umar Serajuddin & Nobuo Yosh, 2016. "A global count of the extreme poor in 2012: data issues, methodology and initial results," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(2), pages 141-172, June.
  3. Marcel Fafchamps & Forhad Shilpi, 2013. "Determinants of the Choice of Migration Destination," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(3), pages 388-409, 06.
  4. Céline Ferré & Francisco H.G. Ferreira & Peter Lanjouw, 2012. "Is There a Metropolitan Bias? The relationship between poverty and city size in a selection of developing countries," World Bank Economic Review, World Bank Group, vol. 26(3), pages 351-382.
  5. Kathleen Beegle & Joachim De Weerdt & Stefan Dercon, 2011. "Migration and Economic Mobility in Tanzania: Evidence from a Tracking Survey," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 1010-1033, August.
  6. Ravallion, Martin, 2016. "The Economics of Poverty: History, Measurement, and Policy," OUP Catalogue, Oxford University Press, number 9780190212773, April.
  7. Schwartz, Aba, 1973. "Interpreting the Effect of Distance on Migration," Journal of Political Economy, University of Chicago Press, vol. 81(5), pages 1153-1169, Sept.-Oct.
  8. Jonathan R. W. Temple, 2005. "Growth and Wage Inequality in a Dual Economy," Bulletin of Economic Research, Wiley Blackwell, vol. 57(2), pages 145-169, 04.
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