The Harris-Todaro Labor Allocation Mechanism as an Evolutionary Game

João Sanson

No 133, Econometric Society 2004 Latin American Meetings from Econometric Society

Abstract: The Harris-Todaro model is reinterpreted under an evolutionary game approach, including the behavior of migrants under bounded rationality in a process of imitation or learning. A first feature is an improvement upon Harris-Todaro by replacing the sign-preserving function of the adjustment mechanism by a replicator dynamics. The worker's decision to migrate to the urban area depends upon the expected differential between urban and rural wage. However, the probability associated to getting a job in the traditional, or formal, sector, which defines the expected urban wage, is itself endogenous, since it is affected by migration. Besides, the worker is myopic in forming expectations, having only one period as the planning horizon. This implies bounded rationality on the part of the migrant worker. The migratory movement of workers is interpreted as a process of imitation or learning. A second basic feature of the model is an interpretation of the equilibrium condition as a mixed strategy equilibrium of an evolutionary game. In this game, a replicator dynamics is a result instead of a postulate, as is the case of the dynamic adjustment mechanism of the original model. Here it appears as a spontaneous result from the interaction of heterogeneous workers

Keywords: migration; labor market; evolutionary game; bounded rationality (search for similar items in EconPapers)
JEL-codes: C72 J6 O15 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-evo and nep-ure
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Citations: View citations in EconPapers (1)

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Working Paper: The Harris-Todaro labor Allocation Mechanism as an Evolutionary Game (2003)
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