Urban-Rural Wage Gaps in Developing Countries: Spatial Misallocation or Efficient Sorting?
Ahmed Mobarak () and
Additional contact information
Mike Waugh: New York University
No 1032, 2016 Meeting Papers from Society for Economic Dynamics
To what extent do the large urban-rural wage gaps in developing countries reflect a spatial misallocation of labor? We answer this question using a dynamic model of internal migration that encompasses two broad interpretations of these gaps. The first is that workers are misallocated across space due to uninsurable migration risk and incomplete markets. The second is that workers are heterogenous and sort efficiently across space given migration costs. We discipline the model quantitatively using evidence from a controlled migration experiment in Bangladesh and new survey evidence about migration opportunities for potential migrants. We then use the model to compare the status quo to the efficient spatial allocation of workers chosen by a benevolent planner. We conclude that urban-rural wage gaps mostly reflects sorting and migration costs, though improved access to financial markets would still reduce misallocation and improve living standards substantially for some workers.
New Economics Papers: this item is included in nep-dge, nep-mig and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:1032
Access Statistics for this paper
More papers in 2016 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().