Economic Incentives for an Urban Bias in Development Policies

Gene W Gruver and Lester A Zeager

Bulletin of Economic Research, 1990, vol. 42, issue 1, 55-62

Abstract: This paper presents a labor turnover model in which urban employers have an economic incentive to support an urban bias in development policies because of the indirect effect of rural incomes on urban training expenditures through the rate of labor turnover. A comparative static analysis of the model shows that an income transfer from rural workers to urban workers increases the profits of urban employers, even if urban employers are not directly involved in the transfer. Unlike previous versions of the labor turnover model, worker behavior is explicitly grounded in utility maximization. Copyright 1990 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Date: 1990
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