Question

Explain Harris Todaro model with example of a country other than India.

Answer 1

The Harris-Todaro model of the rural-urban migration process is based upon under an agent-based approach. The migration of the workers is interpreted as a process of social learning by imitation, formalized by a computational model.

By simulating this model, we observe a transitional dynamics with the continuous growth of the urban fraction of the overall population toward an equilibrium. Such an equilibrium is characterized by the stabilization of rural-urban expected wages differential, urban concentration, and urban unemployment.
. The key hypothesis of Harris and Todaro is that migrants react mainly to economic incentives, earnings differentials, and the probability of getting a job at the destination to influence the migration decision.

In other words, these authors posit that rural-urban migration will occur while the urban expected wage exceeds the rural wage.

From this crucial assumption, as denominated by Harris-Todaro, is deduced that the migratory dynamics leads the economic system toward an equilibrium with urban concentration and high urban unemployment.
The inclusion of the influence of neighbors was done via an Ising-like model. The economic analogous to the external field in the Ising hamiltonian was the differential of expected wages between urban and rural sectors.

In these works, the crucial assumption of Harris and Todaro was taken for granted. Now, we are motivated by the following question: can the crucial assumption and equilibrium with urban concentration and urban unemployment obtained from the original Harris-Todaro model be generated as emergent properties from the interaction among adaptative agents? To answer this question we implemented an agent-based computational model in which workers grope for the best sectorial location over time in terms of earnings.

The economic system simulated is characterized by the assumption originally made by Harris and Todaro. The dispersed and non-coordinated individual migration decisions, made based on local information, generate aggregate regularities.

Firstly, the crucial assumption of Harris and Todaro, the principle that rural-urban migration will occur while the urban expected wage exceeds the rural wage, comes out as a spontaneous upshot of interaction among adaptative agents.

Secondly, the migratory dynamics generated by agents that seek to adapt to the economic environment that they co-create lead the economy toward a long run equilibrium characterized by urban concentration with urban unemployment.

When this long-run equilibrium is reached, the generalized Harris-Todaro condition is satisfied, i.e., there is a stabilization of the rural-urban expected wage differential. Thirdly, the impact of the minimum wage and elasticity of terms of trade in a long-run equilibrium obtained by simulations are in agreement with the predictions of the original Harris-Todaro model with Cobb-Douglas technology.