Rural-Urban Migration Explained (Harris-Todaro Model)

Contribution by the Harris-Todaro (HT) (1970) model explains a powerful explanation of urban unemployment in less developed economies. The authors propose that rural-urban migration continues to occur till actual rural wage equals expected urban wage. Expected urban wage is the actual wage multiplied by the probability of being employed. Unemployment is thus consistent with equilibrium in this model. The hypothesis and predictions of this model have been subject to econometric evaluation and have been corroborated by several studies (Mazumdar, 1987, Willianson, 1988). The key hypothesis of HT are that migrants react mainly to economic incentives, earning differentials and the probability of getting a job at the destination have influences on the migration decision. This essay will begin with an evaluation of the HT model with an insight on the Todaro Paradox, and concluding the implications of this claim on unemployment and rural-urban migrating patterns.

As individuals self-select themselves to migrate; they discount their future expected income to net migration costs. While labour demand in the city increases exogenously, the labour supply with migration increases endogenously. In steady state, migration flows ensure that the urban labour force grows at the same rate as labour demand. The Todaro Paradox observes the link between urban unemployment and migration flows. Policies aimed at increasing urban jobs may rather create urban unemployment due to ‘induced migration’. This can be dated back to Kenya 1964, when the government and private sector wanted to increase employment by 15%, but rather increased overall unemployment by attracting low-skilled, unemployed workers from rural areas.

Internal migration allows for a diversified pool of labour, information spill-over and move from agricultural dependency to manufacturing and service. Undoubtedly, China’s labour market reforms have allowed for relaxing of migration policies. An influential study by De Brauw et al (2002) and Zhang and Song (2003) illustrate that labour markets have allowed migration to become the dominant form of off-farm activity. It is becoming increasing dominated by young workers, especially women from the rural areas to participate in rapidly expanding sectors. Furthermore, Anderson (2002) studied that internal migration in Bolivia has contributed towards its poverty reduction. Effective polices allow for the cost of rural-urban migration to be low, in terms of basic health, education and accommodation. These studies form a critic of the HT model and Todaro Paradox, ignoring the dynamics of migration patterns.

Policies that make urban wage less rigid bring allocation of labour in the economy to optimal. HT insisted that urban wage subsidies coupled with migration restriction will move the economy to a greater aggregate welfare. Bhagwati and Srinivasan (1974), in contrast state that wage subsidies can be given to both the sector, reducing unemployment and out-migration. Basu (1980), further found that any wage subsidy above the uniform level would also lead to social optimum.

While the HT model fails in case of China, it can be further criticized with a discussion of the informal sector. The informal sector comprises of individuals who are self-employed and not subject to wage rigidity as less government regulations and controls. An influential study by Meng (2001) show that most of Chinese migrant workers belong to the informal sector. Further, the longer they remain migrants the more likely they move to being self-employed. Such findings are also consistent with Bangladesh, where temporary migration takes place among workers in the RMG sector.

Rural households are often disadvantaged in terms of education, health, social security, income and welfare. Growth of large metropolitan cities to an extent also increase livelihoods of its dwellers. Implications of HT model have allowed for many policies to restrict rural-urban migration. This limits the opportunities of the less-fortunate to migrate to the city in search for a better livelihood for those they leave behind. The case for migration is two-fold. The development of export oriented garments industries in Bangladesh have allowed for many rural households to migrate to the city. The industry benefits from a large pool of cheap labour.