Production Linkages and Rural-Urban Migration

Kul Bhatia ()

Journal of Economic Development, 2001, vol. 26, issue 2, 1-16

Abstract: Flexible production linkages between the rural and urban sectors are incorporated into the Harris Todaro (HT) model. Each sector uses a part of the other¡¯s output as an intermediate input in a small open economy. Implications of separability, elasticities of substitution, and input complementarity in a three-input production function are examined. The intermediate input in the minimum-wage sector has a more pervasive influence than its counterpart in the rural sector. The well known HT result from a final-goods-only (FGO) specification that an increase in expected urban wage causes an outmigration from the rural sector does not hold under several parametric configurations. Unlike the case of a non-traded intermediate good used in fixed proportions, an urban wage subsidy may lower rural employment, as in the FGO specification.

Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:jed:journl:v:26:y:2001:i:2:p:1-16

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