Question

Consider the Harris-Todaro migration model applied to the United States; where average annual personal income is $41,000 in Jackson, MS, with 9.82% unemployment rate; and $63,800 in Chicago, with a 6.24% unemployment rate. Applying these data, please answer the following questions:

(1) Explain why annual income is higher in Chicago than Jackson.   

(2) Explain why unemployment rate is lower in Chicago than Jackson.  

(3) What is the probability that an individual would find employment in Chicago?

(4) What is the probability that an individual would find employment in Jackson?

(5) Calculate a potential migrant’s Expected Earnings (dollar amount) in Jackson.

(6) Calculate a potential migrant’s Expected Earnings (dollar amount) in Chicago.

(7) What would be the Expected Earnings differential between the two cities in this model?

(8) Between Jackson and Chicago, which city would exhibit migration pull-factors? Explain.

(9) Between Jackson and Chicago, which city would exhibit migration push-factors? Explain.

(10) Based on this Harris-Todaro model, explain whether or not a College graduate in Jackson would decide to move to Chicago.

Answer 1

1) The annual income of chicago as it big city with urban wages rate and standard of living as compared to Jackson.

2) The unemployment rate is lower in chicago as compared to jackson as chicago is big city with urban model of economy and there are more job oppurtunities as compared to jackson so people migrate more due to this reason and the wage rate is also good in urban area as compared to rural.

An increase in the population has no effect on the labor employed in manufacturing because the demand for labor in manufacturing is unit elastic.

3) The probability of getting job in Chicago is around 95% as only 6% approx is the unemployment rate and the average annula personal income is also good which shows the wage rate and chances of job oppurtunities are higher.

4) The probability of getting job in Jackson is near to 90% where the income is also lower than as compared to Chicago plus the number of oppurtunities is also less.

5) The expected earnings is based on lots of factors but as we are given with only Annual personal income and Uemployment rates so we have to calculate accordingly.

so this means that the persons who will be employed are the ones who will be earning so here in Jackson employment rate = (100%-9.82%) = 90.18%

now if we multiply 90.18% with the average annual personal income of $41000 we will get the answer ($ 41000*90.18)/100 = $36973.8

6)

The expected earnings is based on lots of factors but as we are given with only Annual personal income and Uemployment rates so we have to calculate accordingly.

so this means that the persons who will be employed are the ones who will be earning so here in Chicago employment rate = (100%-6.24%) = 93.76%

now if we multiply 93,76% with the average annual personal income of $63800 we will get the answer ($63800*93.76)/100 = $59818.88

7) The difference between the expected earnings of these 2 cities will be

Chicago Jackson

$59,818.88 - $36,973.8 = $22,845.08

8) Between Jackson and Chicago, which city would exhibit migration pull-factors - i think chicago has more pull factor due to

i) urban wage rates

ii) high standard of living

iii) More job oppurtunities

iv) better facilities due to urban model of economy

v) better lifestyle

9) Between Jackson and Chicago, which city would exhibit migration push-factors - i think Jackson has more push factors due to :

i) less job oppurtunities

ii) wage rate is less due to non urban model

iii) standard of living is average as annual income is lower than urban areas

iv) lack of facilities

10) The Harris–Todaro model, named after John R. Harris and Michael Todaro, is an economic model developed in 1970 and used in development economics and welfare economics to explain some of the issues concerning rural-urban migration. The main assumption of the model is that the migration decision is based on expected income differentials between rural and urban areas rather than just wage differentials. This implies that rural-urban migration in a context of high urban unemployment can be economically rational if expected urban income exceeds expected rural income.

according to this model Chiacgo is favorable place for any college graduate who wants to get job easily as there are more oppurtunities to grow and settle with better lifestyle and standard of living as compared to Jackson due to wage rate differentials.