A condition for the reduction of urban unemployment in the Harris–Todaro model

Masaharu Nagashima ()
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Masaharu Nagashima: Saitama University

Asia-Pacific Journal of Regional Science, 2018, vol. 2, issue 1, No 14, 243-255

Abstract: Abstract The purpose of this paper is to re-examine the Harris–Todaro model and Todaro paradox in developing countries. Specifically, we address the question of whether new job creation in urban areas always increases urban unemployment. The results of this analysis lead to the derivation of a necessary and sufficient condition under which urban unemployment does not increase when urban social infrastructure is improved and new employment is created. In short, this condition circumvents Todaro paradox. It involves the relationship between an institutionally and legally fixed urban minimum wage in the model and agricultural productivity. The condition itself is simple, but it offers significant suggestions for actual policy design.

Keywords: Harris–Todaro model; Domestic migration; Domestic wage gap; Informal sector; Urban unemployment (search for similar items in EconPapers)
JEL-codes: J61 J64 O12 O17 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s41685-018-0070-8

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