Did public wage premiums fuel agglomeration in LDCs?
We build and test a model of how the growth of public jobs with wage premiums may help to explain the high and potentially inefficient level of urbanization in LDCs. Public jobs comprise about 40% of non- agricultural employment in LDCs, and have frequently offered substantial wage premiums. The Harris-Todaro model - and its extensions- suggest that wage premiums induce inefficient agglomeration, but that model critically assumes that wage premium jobs are allocated to favor local residents. This is inapplicable to public appointments in various LDCs. In the two-region general equilibrium model discussed here, the existence of spatial mobility costs are shown to be sufficient for wage premiums to result in inefficient agglomeration in regions that are allocated wage premium jobs. This weakens the assumptions under which wage premiums promote agglomeration, and extends the idea to LDCs such as Egypt, Ethiopia, and Kenya, where public jobs have, until recent reforms, offered substantial wage premiums, but are not allocated so as to favor local residents. The policy implications of this model also differ from Harris-Todaro. For example, if wage premiums are later reduced, the agglomeration persists: with mobility costs, the history of the location of jobs with wage premiums matters. We explore our hypotheses using Egyptian data. Between 1960 and 1986 the share of public jobs increased from 10% to 34% of the labor force, public jobs were centrally allocated, and offered a high total compensation premium. We find that public jobsâ€™ growth has substantially altered the pattern of regional mobility and population shares, in a way that is consistent with this theory of agglomeration due to wage premiums and mobility friction Keywords; public sector, agglomeration, migration, developing country JEL classification: J61, J68, J60, J45, H11 & H40
|Date of creation:||01 Jan 2000|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (+44) 23 80592537
Fax: (+44) 23 80593858
Web page: http://www.economics.soton.ac.uk/
More information through EDIRC
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.:
- Pramila Krishnan & Tesfaye Gebre Selassie & Stefan Dercon, 1998.
"The Urban Labour Market During Structural Adjustment: Ethiopia 1990-1997,"
Center for Economic Studies - Discussion papers
ces9817, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- Pramila Krishnan & Tesfaye Gebre Selassie & Stefan Dercon, 1998. "The urban labour market during structural adjustment: Ethiopia 1990-1997," CSAE Working Paper Series 1998-09, Centre for the Study of African Economies, University of Oxford.
- Pramila Krishnan & Stefan Dercon, 1998. "The urban labour market during structural adjustment: Ethiopia 1990-1997," Economics Series Working Papers WPS/1998-09, University of Oxford, Department of Economics.
- Alberto F. Ades & Edward L. Glaeser, 1994.
"Trade and Circuses: Explaining Urban Giants,"
NBER Working Papers
4715, National Bureau of Economic Research, Inc.
- Glaeser, E.L. & Ades, A.F., 1993. "Trade and Circuses: Explaining Urban Giants," Harvard Institute of Economic Research Working Papers 1646, Harvard - Institute of Economic Research.
- Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December.
- 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.
- Krugman, Paul & Elizondo, Raul Livas, 1996.
"Trade policy and the Third World metropolis,"
Journal of Development Economics,
Elsevier, vol. 49(1), pages 137-150, April.
- Gelb, A & Knight, John B & Sabot, R H, 1991. "Public Sector Employment, Rent Seeking and Economic Growth," Economic Journal, Royal Economic Society, vol. 101(408), pages 1186-99, September.
- Schiavo-Campo, Salvatore & de Tommaso, Giulio & Mukherjee, Amitabha, 1997. "An international statistical survey of government employment and wages," Policy Research Working Paper Series 1806, The World Bank.
- Fujita, Masahisa & Thisse, Jacques-François, 1996.
"Economics of Agglomeration,"
CEPR Discussion Papers
1344, C.E.P.R. Discussion Papers.
- Fujita, Masahisa & Thisse, Jacques-Francois, 1996. "Economics of Agglomeration," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 339-378, December.
- Markusen, Ann & Hall, Peter & Campbell, Scott & Deitrick, Sabina, 1991. "The Rise of the Gunbelt: The Military Remapping of Industrial America," OUP Catalogue, Oxford University Press, number 9780195066487, March.
- Keyfitz, Nathan, 1982. "Development and the Elimination of Poverty," Economic Development and Cultural Change, University of Chicago Press, vol. 30(3), pages 649-70, April.
- Mazumdar, Dipak, 1987. "Rural-urban migration in developing countries," Handbook of Regional and Urban Economics, in: E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 2, chapter 28, pages 1097-1128 Elsevier.
- Fields, Gary S, 1982. "Place-to-Place Migration in Colombia," Economic Development and Cultural Change, University of Chicago Press, vol. 30(3), pages 539-58, April.
- Horton, Susan & Kanbur, Ravi & Mazumdar, Dipak, 1991. "Labor markets in an era of adjustment : an overview," Policy Research Working Paper Series 694, The World Bank.
- Schultz, T Paul, 1982. "Lifetime Migration within Educational Strata in Venezuela: Estimates of a Logistic Model," Economic Development and Cultural Change, University of Chicago Press, vol. 30(3), pages 559-93, April.
- Graves, Philip E., 1979.
"A life-cycle empirical analysis of migration and climate, by race,"
Journal of Urban Economics,
Elsevier, vol. 6(2), pages 135-147, April.
- Graves, Philip E., 1979. "A life-cycle empirical analysis of migration and climate, by race," MPRA Paper 19921, University Library of Munich, Germany.
- Krugman, Paul, 1991.
"Increasing Returns and Economic Geography,"
Journal of Political Economy,
University of Chicago Press, vol. 99(3), pages 483-99, June.
- Duncan Black & Vernon Henderson, 1997. "Urban Growth," NBER Working Papers 6008, National Bureau of Economic Research, Inc.
- Kathleen M. Day, 1992. "Interprovincial Migration and Local Public Goods," Canadian Journal of Economics, Canadian Economics Association, vol. 25(1), pages 123-44, February.
- Williamson, Jeffrey G., 1988. "Migration and urbanization," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 11, pages 425-465 Elsevier.
- Tunali, Insan, 1996. "Migration and Remigration of Male Household Heads in Turkey, 1963-1973," Economic Development and Cultural Change, University of Chicago Press, vol. 45(1), pages 31-67, October.
- Levy, Mildred B & Wadycki, Walter J, 1974. "Education and the Decision to Migrate: An Econometric Analysis of Migration in Venezuela," Econometrica, Econometric Society, vol. 42(2), pages 377-88, March.
When requesting a correction, please mention this item's handle: RePEc:stn:sotoec:0020. 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: (Chris Thorn)The email address of this maintainer does not seem to be valid anymore. Please ask Chris Thorn to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.