The Welfare Economics of Rural to Urban Migration: The Harris-Todaro Model Revisited
Thomas Krichel () and
Paul Levine ()
School of Economics Discussion Papers from School of Economics, University of Surrey
The Harris-Todaro model of rural to urban migration is extended to include urban agglomeration effects, some urban real wage flexibility and a government budget constraint. Without employment subsidies, laissez-faire migration is excessive unless real wage flexibility and agglomeration effects are high. Laissez-faire migration is too low compared with the first best outcome supported by a subsidies, if its financing involves no costs. Simulations suggest that such a program would imply a substantial increase in taxation. If, as seems likely, an increase of this magnitude involves economic costs, then the optimal outcome falls well short of first best.
JEL-codes: F22 J61 O15 (search for similar items in EconPapers)
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