The Welfare Economics of Rural to Urban Migration: The Harris-Todaro Model Revisited
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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- 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.
- N. Jayaram & Surendra K. Gupta & A.P. Barnabas & Sachchidananda & P.S. Pachauri & M.L. Khattar & B.N. Sampath & H. R. Khanna, 1985. "India," India Quarterly: A Journal of International Affairs, , vol. 41(1), pages 177-179, January.
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