Lecture 10 Don DeVoretz

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Lecture 10Don DeVoretz

• INTERNAL MIGRATION
• QUO VADIS ?
• BOOM OR BUST ?

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QUESTIONS

• 1. Why can migration be beneficial to the
  individual and harmful to society ?
• a. What are the externalities and
• b. What are the false Expectations ?
• 2. What is the "optimal size" of a city ?
• a. Why is Mexico City with 24 million
  dysfunctional and Tokyo not ?

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Stylized Facts

• City 1990 (mil) 2000 (mil)
• Mexico City 19.4 24.4
• Shanghai 12.6 14.7
• Delhi 8.6 12.8
• Lagos 9.0 12.0
• Manila 8.4 11.6
• Tokyo 15.7 16.0

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More Questions

• 4. What is the motivation for the individual to
  move ?
• a. Economic motivation Competing Views
• i. Human capital model-based upon rate of return
  

Educated Movers earnings
earnings
No education-no move
x
E0
Age
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Economic Motivation continued

• ii. Labour market adjustment
• Expected wage differential, distance and friends.

Ld
Ls No Mig
Ls MIG
Wage modern
Modern labour demand
Wage equiol
Wage ag
Ag labor demand
L0
Labour S,D
Ld
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Non-economic motivation

• i. Demographic model
• differential urban-rural fertility rate
• ii. Gravity model
• M ij,t Lh (M ij,t)
• M ij,t total number of movers per 1,000 pop in
  t
• where L gt 0 and h lt0 or infinite
• Example, L3, h0 then M ij, M ij,

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More Non-Economic Motives

• iii. Intergenerational stages

Ag
Ag
Intermediate City
Metropole
ROW
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Intergenerational Moves

• Ag-Ag traditional slash and burn ag. Africa
• Ag-Intermediate. Unskilled temporary
• 1st generation male
• Intermediate-Metropole Education
• 2nd generation skilled and permanent
• Metropole-ROW 3rd generation of brain drain

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Philippines Case Study

• a. Rate of movement
• range from 10 to 40 per 1,000
• b. Income gains from movement
• Function of age and education
• over 40, uneducated or educate close to zero
• 20-30 , rural-urban secondary had 40 r of r
• Greatest incentive to move is young-educated

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Philippines continued

• c. Costs of movement
• Small, unemployment costs absorbed by friends
• d. rate of return from movement
• C ij ( Yi-Yj )/ (1r)t
• range from zero, over 40 to 40 for 20 with post
  secondary education
• e. Size of surplus in WA Lewis model
• less than 1/2 of 1 increment in investment

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Policy implications

• Given small surplus, WA Lewis model not apply
• 3/5 migrants remain underemployed in urban area
• Policy options to stem the flow
• wage subsidies,
• food price subsidies
• Multinationals,
• Subsidized education

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End of Show