Rural-urban migration with remittances and welfare analysis

Li-Wen Hung and Shin-Kun Peng

Regional Science and Urban Economics, 2021, vol. 91, issue C

Abstract: Given the growing importance of rural-urban migration with remittances to rural development and urban income inequality, this paper proposes a theoretical model to investigate unskilled migration with remittances and the relevant welfare implications. Migrants remit part of their wage incomes to support their families of origin out of distinct motivations. The adequate explanation for this behavior may be “enlightened self-interest.” Alongside that, we introduce the mental cost of migration, which means that both migrants and remaining members suffer when migrants leave their families and generate the utility loss. We then construct a modified Melitz model with these ingredients to examine the urbanization process and corresponding welfare issues. The results show that when the remittance increases, it will enlarge the inequality between entrepreneurs and migrant workers. Moreover, when the trade cost is relatively small, the average utility level of migrant households is increasing in the remittance rate. Finally, we employ a numerical approach to simulate the optimal remittance rate and compare the results of different scenarios.

Keywords: Urbanization; Remittances; Rural-urban migration; Mental cost (search for similar items in EconPapers)
JEL-codes: D60 F24 R13 R23 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0166046220303148
Full text for ScienceDirect subscribers only

Related works:
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:eee:regeco:v:91:y:2021:i:c:s0166046220303148

DOI: 10.1016/j.regsciurbeco.2020.103629

Access Statistics for this article

Regional Science and Urban Economics is currently edited by D.P McMillen and Y. Zenou

More articles in Regional Science and Urban Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().