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

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  • Luc Christiaensen
  • Joachim De Weerdt
  • Ravi Kanbur

Abstract

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.

Suggested Citation

  • Luc Christiaensen & Joachim De Weerdt & Ravi Kanbur, 2017. "Cities, Towns, and Poverty: Migration Equilibrium and Income Distribution in a Todaro-type Model with Multiple Destinations," LICOS Discussion Papers 39517, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  • Handle: RePEc:lic:licosd:39517
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    References listed on IDEAS

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    1. Basu, Arnab K. & Chau, Nancy H. & 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. Todaro, Michael P, 1969. "A Model for Labor Migration and Urban Unemployment in Less Developed Countries," American Economic Review, American Economic Association, vol. 59(1), pages 138-148, March.
    3. 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.
    4. 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, June.
    5. Anand, Sudhir & Kanbur, S M R, 1985. "Poverty under the Kuznets Process," Economic Journal, Royal Economic Society, vol. 95(380a), pages 42-50, Supplemen.
    6. Christiaensen,Luc & Kanbur,Ravi & Christiaensen,Luc & Kanbur,Ravi, 2016. "Secondary towns and poverty reduction : refocusing the urbanization agenda," Policy Research Working Paper Series 7895, The World Bank.
    7. Gharad Bryan & Shyamal Chowdhury & Ahmed Mushfiq Mobarak, 2014. "Underinvestment in a Profitable Technology: The Case of Seasonal Migration in Bangladesh," Econometrica, Econometric Society, vol. 82, pages 1671-1748, September.
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    10. 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.
    11. David McKenzie & John Gibson & Steven Stillman, 2010. "How Important Is Selection? Experimental vs. Non-Experimental Measures of the Income Gains from Migration," Journal of the European Economic Association, MIT Press, vol. 8(4), pages 913-945, June.
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    1. repec:eee:wdevel:v:107:y:2018:i:c:p:264-276 is not listed on IDEAS
    2. Emran, M. Shahe & Shilpi, Forhad, 2018. "Beyond dualism: Agricultural productivity, small towns, and structural change in Bangladesh," World Development, Elsevier, vol. 107(C), pages 264-276.

    More about this item

    Keywords

    Secondary Towns versus Big Cities; Poverty Reduction; Poverty Gradient; Todaro Model; Migration Equilibrium; Equilibrium Income Distribution;

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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