Preference Matching, Income, and Population Distribution in Urban and Adjacent Rural Regions

Amitrajeet Batabyal and Hamid Beladi

MPRA Paper from University Library of Munich, Germany

Abstract: We analyze the impact of preference matching and income on the distribution of the population in an aggregate economy consisting of an urban and an adjacent rural region. It costs more (less) to live in the urban (rural) region. Individuals choose freely to live either in the urban or in the rural region. They differ in their incomes. These incomes are uniformly distributed on the unit interval. Our analysis leads to four results. First, when the cost differential parameter satisfies a condition, both regions are occupied in the equilibrium. Second, when this parametric condition holds, in any equilibrium in which the mean income of individuals varies across the two regions, every resident of the rural region has a lower income than every resident of the urban region. Third, there exists an income threshold and all individuals with higher (lower) incomes choose to live in the urban (rural) region. Finally, in the equilibrium with income sorting, it is possible to make everyone better off by slightly modifying their residential choices.

Keywords: Income; Population Distribution; Preference Matching; Rural Region; Urban Region (search for similar items in EconPapers)
JEL-codes: O18 R12 (search for similar items in EconPapers)
Date: 2018-09-15, Revised 2018-12-18
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Preference matching, income, and population distribution in urban and adjacent rural regions (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:92308

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