Question

1. With the aid of either Todaro or Harris-Todaro migration model, explain the continued process of rural-urban migration despite growing unemployment in urban areas

Answer 1

On the basis of the Harris-Todaro model, named after economists John R.Harris and Michael Todaro which explains the general economic rationale behind the rural-urban migration, the rural-urban migration is fundamentally driven by the urban and rural age or income differential pertaining to the labor markets in both rural and urban areas. According to the model, the rural-urban migration would continue as long as the expected wage or income in the urban areas exceeds or surpass the expected income or wage in rural areas. Once the expected income or wage in both areas would be equal the migration would cease or stop and if the expected income or wage in the rural areas exceeds the expected wage or income in urban regions then it would lead to urban-rural migration altering the migratory pattern. Now, under the model, it has been assumed that the labor markets in both areas are perfectly competitive and the individual firms would maximize their respective profit level by continuing to hire laborers or workers as long as the expected labor wage rate is equal to the marginal productivity of labor. Now, the determination of the expected wage rate or income is ideally or practically contingent on the labor market conditions or the respective factors or attributes influencing the overall labor demand by the firms or companies and the total labor supply by the workers or laborers. At the equilibrium level or point, the expected wage or income in the rural areas is equal to the expected wage rate or income in the urban areas and the rural-urban migration would stop. However, as this expected wage rate in the urban regions ideally depends on the various factors affecting both the labor demand and labor supply in the urban labor market, it does not necessarily entail the equilibrium wage rate or income in the urban labor markets and it does not guarantee that there will be full employment in the urban labor market, regardless of the expected income or wage rate differential between the rural and urban regions/areas. Hence, positive unemployment would prevail as the rural-migration continues and even at the equilibrium level or point where the rural-urban migration would stop or cease.