Question

Explain the model of labor migration to and from urban areas as fully as you can in words. In particular address the following:

a. Why do young workers and some older workers locate in the urban area?

b. Who locates in the rural area? Why?

c. Why don’t firms all locate in one large city?

d. What determines the lifetime incomes of workers?

e. Explain the conditions for steady-state equilibrium.

Answer 1

a. Why do young workers and some older workers locate in the urban area?
- Young workers locate to urban areas in order to look for better job opportunities and sometimes to find jobs with better incentives and higher wages than in rural areas. Some older people also migrate for the same reason, but mostly because urban areas have better health facilities and other facilities which would have been otherwise difficult to attain in rural areas.

b. Who locates in the rural area? Why?
- Mostly older wokers and female workers locate in the rural area because they not always highly skilled to work in the manufacturing sectors and most often than not become a liability to their husbands or sons but, in rural areas they can use their skills in agricultural sector and provide for the family which will produce more output than working in urban area.

c. Why don’t firms all locate in one large city?
-  Firms do not all locate in one large city due to many factors. One such factor is - availability of resources and labor. If firms locate in the same geographical area, their demnad of labor would not meet because of its high demand which will exceed the supply of labor force in that particular area over time. Another reason is that if firms clutter in one place, it will exhaust its natural resources and also pollute the area to a higher degree.
It will also not have enough target customers to sell its finished products.

d. What determines the lifetime incomes of workers?
- The factors that would determine the lifetime income of a worker would be-

• educational qualification
• skill sets
• experience of work
• recommendations of his job
• efficiency