Question

What predictions follow from the Todaro – Harris model for urban unemployment and the urban informal sector? Fully develop your argument.

Answer 1

The Todaro-Harris model explains about the urban unemployment and what are the factors which induce this unemployment and informal sectors in the urban areas. Firstly we must understand the fact that wage in urban areas will be considerably higher than that of the rural area. And this results in a situation in which the people in the rural area will be more attracted towards the higher wages in urban areas and they try to migrate to the urban areas. But the job or employment in the urban areas will be depended on the number of jobs available and the population. In least developed countries the jobs in urban ares is very limited and it creates a urban unemployment and informal sector. The decision of the migration taken by the employee will decide this unemployment, which means making the decisions to look a job in urban area is impacted.

Thus the urban wages keep on increasing in the urban sector and on the other hand the agricultural productivity decreases. When the agricultural productivity decreases it will also reduce the expected income of the rural people. In such a situation the people tend to migrate to urban areas for better living conditions. And this will lead to formation of informal urban population and also result in the increase of the urban unemployment.