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Lecture 6 Don DeVoretz

Lecture 6 Don DeVoretz. INTERNAL MIGRATION: QUO VADIS ? BOOM OR BUST ?. 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 ?

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Lecture 6 Don DeVoretz

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  1. Lecture 6Don DeVoretz INTERNAL MIGRATION: QUO VADIS ? BOOM OR BUST ?

  2. 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 ?

  3. 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

  4. 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 Mover’s earnings earnings No education-no move x E=0 Age

  5. 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 Ld Labour S,D

  6. 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 > 0 and h <0 or infinite • Example, L=3, h=0 then M ij,=M ij,

  7. More Non-Economic Motives • iii. Intergenerational stages Ag Ag Intermediate City Metropole ROW

  8. 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

  9. 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

  10. Philippines continued • c. Costs of movement • Small, unemployment costs absorbed by friends • d. rate of return from movement • C ij = ( Yi-Yj )/ (1+r)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

  11. 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

  12. End of Show

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