The Todaro Paradox Revisited

Yves Zenou

No 652, Working Paper Series from Research Institute of Industrial Economics

Abstract: The Todaro Paradox states that policies aimed at reducing urban unemployment are bound to backfire: they will raise rather than reduce urban unemployment. The aim of this paper is to reexamine this paradox in the context of efficiency wage and search-matching models. For that, we study a policy that consists in decreasing the urban unemployment benefit. In an efficiency wage model, we find that there is no Todaro paradox while this is not always true in a search-matching model since a decrease in the urban unemployment benefit can increase both urban employment and unemployment.

Keywords: Efficiency Wages; Search-Matching; Rural-Urban Migration; Policy (search for similar items in EconPapers)
JEL-codes: D83 J41 J64 O15 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2005-11-09
New Economics Papers: this item is included in nep-dev, nep-lab and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://www.ifn.se/Wfiles/wp/WP652.pdf (application/pdf)

Related works:
Working Paper: The Todaro Paradox Revisited (2005)
Working Paper: The Todaro Paradox Revisited (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0652

Access Statistics for this paper

More papers in Working Paper Series from Research Institute of Industrial Economics Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Elisabeth Gustafsson ().