Chapter 8 Urbanization amp; Rural-Urban Migration.ppt

Chapter 8: Urbanization Rural-Urban Migration Urbanization and Development Economic development causes urbanization There is a positive correlation with economic development and urban population growth Urbanization Contribution of R-U Migration On average, about 50% of urban population growth is due to R-U migration Rapid R-U migration has resulted in the construction of slumps and shanty towns that house a large percentage of urban population Dualistic Economic Structure Formal sector: organized and regulated economic system e.g., government agencies,banks ; it generates 2/3 of GDP Informal sector: fragmented and unregulated economic system e.g., street vendors, loan sharks ; it generates 1/3 of GDP Dualistic Labor Market Formal labor market: urban rural: skilled labor e.g., government employees, teachers with education and license Informal labor market: urban rural: semi-skilled and unskilled labor e.g., small business, street vendors Urban Informal Sector Most rural migrants find jobs in the “informal” urban labor markets The “informal” urban labor force is a large component of the urban labor force A Model of R-U Migration Urban “informal” sector hires labor from Urban “informal” markets e.g., shop keepers Rural “formal” markets e.g., tractor drivers Rural “informal” markets e.g., farm workers Urban “formal” sector hires labor from Urban “formal” markets e.g., teachers Urban “informal” markets e.g., drivers Todaro’s R-U Migration Model Factors affecting migration decision Expected urban income Probability of finding an urban job Cost of living in urban areas Decision criterion: Migration will take place if the “expected” benefits exceed the costs in present value Todaro’s R-U Migration Model Benefits from migration: Difference between “expected” urban income and rural income R-U wage differential Psychic benefits Costs of migration: Transportation cost Opportunity cost of being unemployed Difference in living expenses Psych