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The Welfare Economics of Rural to Urban Migration: The Harris-Todaro Model Revisited

  • Thomas Krichel


  • Paul Levine


The Harris-Todaro model of rural to urban migration is extended to include urban agglomeration effects, some urban real wage flexibility and a government budget constraint. Without employment subsidies, laissez-faire migration is excessive unless real wage flexibility and agglomeration effects are high. Laissez-faire migration is too low compared with the first best outcome supported by a subsidies, if its financing involves no costs. Simulations suggest that such a program would imply a substantial increase in taxation. If, as seems likely, an increase of this magnitude involves economic costs, then the optimal outcome falls well short of first best.

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Paper provided by School of Economics, University of Surrey in its series School of Economics Discussion Papers with number 9702.

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Date of creation: Feb 1997
Date of revision:
Handle: RePEc:sur:surrec:9702
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  1. Burda, Michael C & Funke, Michael, 1992. "Trade Unions, Wages and Structural Adjustment in the New German States," CEPR Discussion Papers 652, C.E.P.R. Discussion Papers.
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