Dynamic control of rural.pdfVIP

Journal of Urban Economics 66 (2009) 196–202 Contents lists available at ScienceDirect Journal of Urban Economics /locate/jue Dynamic control of rural–urban migration Ryo Itoh Institute of Transport Policy Studies, 3-18-19, Toranomon, Minato-ku, Tokyo 105-0001, Japan a r t i c l e i n f o a b s t r a c t Article history: This study investigates the optimal urbanization control of an underdeveloped economy by specifying a Received 22 November 2007 simple dynamic rural–urban model in which the urban sector bears both an intertemporal positive exter- Revised 10 July 2009 nality and a simultaneous negative externality. The dynamic optimization problem is solved for the polit- Available online 15 July 2009 ical intervention of the central government in an intersectoral population distribution with taxes and subsidies. Our analysis provides the following results: (i) a big-push policy that leads an economy to a JEL classification: higher-income steady state with urbanization is not necessarily desirable if the government cannot bor- H21 row money at a sufficiently low interest rate; (ii) in order to sustain an appropriate urbanization speed, O21 R11 urbanization control policy should have a switch: the urban sector should be subsidized in order to accel- erat