Abstract
Should job creation be targeted to big cities or to small towns, if the objective is to minimize national poverty? To answer this question, we develop an equilibrium model of migration from rural areas to two potential destinations, small town and big city. We develop sufficient statistics for policy decisions based on the parameters of the model. The empirical remit of the theoretical model is illustrated with long running panel data from Kagera, Tanzania. Further, we show that the structure of the sufficient statistics is maintained in the case where the model is generalized to introduce heterogeneous workers and jobs.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Albrecht, J., Navarro, L., Vroman, S.: The effects of labour market policies in an economy with an informal sector. Econ. J. 119, 1105–1129 (2009)
Anand, S., Kanbur, R.: Poverty under the Kuznets process. Econ. J. 95(380a), 42–49 (1985)
Basu, A., Chau, N., Fields, G., Kanbur, R.: Job creation in a multi-sector labor market model for developing economies. Oxf. Econ. Pap. 71(1), 119–144 (2019)
Beegle, K., De Weerdt, J., Dercon, S.: Migration and economic mobility in Tanzania: evidence from a tracking survey. Rev. Econ. Stat. 93(3), 1010–1033 (2011)
Beegle, K., Christiaensen, L., Dabalen, A., Gaddis, I.: Poverty in a Rising Africa. World Bank, Washington D.C (2016)
Bencivenga, V.R., Smith, B.D.: Unemployment, migration, and growth. J. Polit. Econ. 105(3), 582–608 (1997)
Bosch, M., Maloney, W.: Labor Market Dynamics in Developing Countries: Comparative Analysis Using Continuous Time Markov Processes. World Bank Policy Research Working Paper, vol. 3583, (2005)
Bryan, G., Chowdhury, S., Mobarak, A.: Underinvestment in a profitable technology: the case of seasonal migration in Bangladesh. Econometrica. 82(5), 1671–1748 (2014)
Christiaensen, L., Demery, L., Kuhl, J.: The (evolving) role of agriculture in poverty reduction – an empirical perspective. J. Dev. Econ. 96(2), 239–254 (2011)
Christiaensen, L., Kanbur, R.: Secondary towns and poverty reduction: refocusing the urbanization agenda. Annu. Rev. Resour. Economics. 9, 405–419 (2017)
Christiaensen, L., De Weerdt, J., Kanbur, R.: Decomposing the contribution of migration to poverty reduction: methodology and application to Tanzania. Appl. Econ. Letters. 26(12), 978–982 (2019)
Christiaensen, L., Martin, W.: Agriculture, structural transformation and poverty reduction – eight new insights. World Dev. 109, 413–416 (2018)
De Weerdt, J., Beegle, K., Bie Lilleør, H., Dercon, S., Hirvonen, K., Kirchberger, M., Krutikova, S.: Kagera health and development survey 2010: basic information document. Rockwool Foundation Working Paper Series. 46, (2012)
De Weerdt, J., Christiaensen, L., Kanbur, R.: When Distance Drives Migration, Towns Can Stimulate Development. manuscript (2019)
Duranton, G.: Growing through cities in developing countries. World Bank Res. Obs. 30(40–73), (2015)
Dorosh, P., Thurlow, J.: Can cities or towns drive African development? Economy-wide analysis for Ethiopia and Uganda. World Dev. 63(10), 113–123 (2014)
Fafchamps, M., Shilpi, F.: Determinants of the choice of migration destination. Oxf. Bull. Econ. Stat. 75(3), 388–409 (2013)
FAO (Food and Agriculture Organization of the United Nations): State of food and agriculture 2017 – leveraging food Systems for Inclusive Rural Transformation. FAO. In: Rome (2017)
Ferré, C., Ferreira, F.H.G., Lanjouw, P.: Is there a metropolitan Bias? The relationship between poverty and city size in a selection of developing countries. World Bank Econ. Rev. 26, 351–382 (2012)
Ferreira, F.H.G., et al.: A global count of the extreme poor in 2012: data issues, methodology and initial results. J. Econ. Inequality. 14(2), 141–172 (2016)
Fields, G.S.: On-the-job search in a labor market model: ex-ante choices and ex-post outcomes. J. Dev. Econ. 30(1), 159–178 (1989)
Fiess, N.M., Fugazza, M., Maloney, W.: Informal self-employment and macroeconomic fluctuations. J. Dev. Econ. 91(2), 211–226 (2010)
Foster, J.E., Shorrocks, A.F.: Poverty Orderings. Econometrica. 56(1), 173–177 (1988)
Frick, S.A., Rodrıguez-Pose, A.: Average city size and economic growth. Camb. J. Reg. Econ. Soc. 9(2), 301–318 (2016)
Gibson, J., Datt, G., Murgai, R., Ravallion, M.: For India’s rural poor, growing towns matter more than growing cities. World Dev. 98, 413–429 (2017)
Harris, J., Todaro, M.: Migration, unemployment, and development: a two-sector analysis. Am. Econ. Rev. 40, 126–142 (1970)
Hnatkovska, V., Lahiri, A.: Rural and urban migrants in India: 1983-2008. World Bank Econ. Rev. 29(1), 257–270 (2015)
Ingelaere, B., Christiaensen, L., De Weerdt, J., Kanbur, R.: Why secondary towns can be important for poverty reduction – a migrant perspective. World Dev. 105, 273–282 (2018)
Katz, E., Stark, O.: Labor migration and risk aversion in less developed countries. J. Labor Econ. 4(1), 134–149 (1986)
McKenzie, D., Gibson, J., Stillman, S.: How important is selection? Experimental vs non-experimental measures of the income gains from migration. J. Eur. Econ. Assoc. 8(4), 913–945 (2010)
McKenzie, D., Gibson, J., Stillman, S.: A land of milk and honey with streets paved with gold: do emigrants have over-optimistic expectations about incomes abroad? J. Dev. Econ. 102, 116–127 (2013)
Moene, K.O.: A reformulation of the Harris-Todaro mechanism with endogenous wages. Econ. Lett. 27(4), 387–390 (1988)
Ravallion, M.: The economics of poverty: history, measurement and policy. Oxford University press. In: New York Oxford (2016)
Satchi, M., Temple, J.: Labor Markets and Productivity in Developing Countries. Rev. Econ. Dyn. 12(1), 183–204 (2009)
Schwartz, A.: Interpreting the effect of distance on migration. J. Polit. Econ. 81(5), 1153–1169 (1973)
Shorrocks, A.F.: Ranking income distributions. Economica. 50(197), 3–17 (1983)
Sjaastad, L.A.: The costs and returns to human migration. J. Polit. Econ. 70(5), 80–93 (1962)
Temple, J.: Growth and wage inequality in a dual economy. Bull. Econ. Res. 57(2), 145–169 (2005)
Temple, J., Ying, H.: Life during structural transformation. University of Bristol Economics Discussion Paper. 14(650), (2014)
Todaro, M.P.: A model of labor migration and urban unemployment in less developed countries. Am. Econ. Rev. 59(1), 138–148 (1969)
World Bank: Poverty and Shared Prosperity, vol. 2016. Taking on Inequality. World Bank, Washington D.C (2016)
Zhu, N., Luo, X.: The impact of migration on rural poverty and inequality: a case study in China. Agric. Econ. 41, 191–204 (2010)
Acknowledgements
The authors acknowledge support from the World Bank and Excellence of Science (EOS) Research Project 30784531 at the Research Foundation – Flanders (FWO). The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Kanbur, R., Christiaensen, L. & De Weerdt, J. Where to create jobs to reduce poverty: cities or towns?. J Econ Inequal 17, 543–564 (2019). https://doi.org/10.1007/s10888-019-09419-5
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10888-019-09419-5
Keywords
- Secondary Towns versus big cities
- Poverty reduction
- Poverty gradient
- Todaro model
- Migration equilibrium
- Equilibrium income distribution