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URBANIZATION AND RURAL- URBAN MIGRATION: THEORY AND POLICY

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Stefania Nastul

on 3 October 2013

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Transcript of URBANIZATION AND RURAL- URBAN MIGRATION: THEORY AND POLICY

THE MIGRATION AND URBANIZATION DILEMMA
THE ROLE OF CITIES
THE URBAN GIANTISM PROBLEM
THE URBAN INFORMAL SECTOR
URBANIZATION AND RURAL- URBAN MIGRATION: THEORY AND POLICY

BY:
Sthepania Medina Bahamon
Stefania Nastul Zapata
Sara Reyes Rodriguez
Daniela Rivera Suaza

We focus on one of the most complex and nuanced dilemmas of the development procces: the phenomenon of massive and historically unpreceden movement of people from the rural countryside to the burgeoning cities of Africa, Asia and America Latina.

The key question is how developing countries are coping with the rapid pace of urbanization economically, environmentally, and politically. A large section of urban population is deprived of even the basic amenities of water, sanitation, house, and access to health and educational facilities.



Positive relationship between per-capita income and urbanization
The share of urban population has increased in both slow growing as well as rapidly growing countries
The share of urban population in developing countries is projected to increase rapidly
A large proportion of urban population in developing countries live in slums
What explains the strong association between urbanization and economic development?
Agglomeration Economies
It is easier to provide residential infrastructures, schools, health-care and other service activities. These benefits are general in nature.
Localization Economies
Benefits accruing to particular sector or particular type of firms from locating in the urban area. Clustering of firms may lower the cost of production.
Benefits that firms, workers, and consumers obtain when locating near each other. These benefits arise due to economies of scale and network effects.
Urbanization Economies
INDUSTRIAL DISTRICTS
EFFICIENT URBAN SCALE
Clustering of firms of same type. Localization economies encourage emergence of industrial districts. Clustering also has spill-over benefits:
1. Flexible Specialization
2. Learning
3. Training and Technological Development
4. Social Capital
Also there are diseconomies of agglomeration. It arouses concern about the processes of formation and cremiciemto of the big cities, as congestion problems occur.
Urban Hierarchy Model (Central Place Theory)
The Differentiated Plane Model
Hierarchy of Cities
Usually, in any country there are more than one cities. Some are big and some are small. What explains the emergence of cities of different sizes in a country? There are two theories:
It is a geographical theory that seeks to explain the size and spacing of cities. Idea is that cities emerge to provide goods and services. Bigger cities provide higher order of goods and services compared to smaller cities. The theory relies on two concepts:
Threshold
Range.
In this model transport cost plays a critical role. Idea here is that firms locate where the transport cost is minimum.
Urban giantism may lead to first-city bias, in which the biggest city receives a disproportionate share of public investment, which aggravates the problem of urban giantism. Causes of Urban Giantism:
1. Colonial legacy
2. Industrial policy of import-substitution and high tariff
3. Lack of democracy
4. Rent seeking behavior of public officials/politicians

First-city bias
Causes of Urban Giantism
A form of urban bias that has often caused considerable harm might be termed first city bias. this means that the country's largest or first city receives a disproportionately large share of public investment and incentives for private investment, in relation to the country's second city and other smaller cities.
Urban giantism probably results from combination of hub-and-spoke transportation system and the location of the political capital in the largest city

thus combining the effects of the urban hierarchy model with the differentiated plane model
One striking feature of the urbanization in developing countries is the presence of a large informal sector (unorganized, unregulated, unregistered).
Between 30% to 70 % of urban labor force works in the informal sector.

The main characteristics of the urban informal sector jobs are:
1. Low skill
2. Low productivity
3. Self-employment
4. Lack of complementary inputs particularly capital
5. Small scale measured in terms of sales, assets, employment etc.
6. Favored by recent migrants Role of Urban Informal Sector

1. Increased migration and aggravating the problem of urban giantism.
2. Increased urban unemployment.
3. Discrimination against formal sector bad in the long run.
4. Women work for low wages at unstable jobs with no employee or social security benefits.

Advantages Urban Informal Sector
1. Informal sector has higher productivity than the rural sector and generates more surplus. These surplus can be utilized to promote the formal sector.
2. It has low capital-intensity. This sector is quite suitable for the factor endowment of developing countries (relatively scarce capital and abundant labor). It can create employment opportunities much faster.
3. It provides learning experience for both wage workers and self-employed and thus enhances human capital.
4. It generates demand for unskilled and semi-skilled workers which are again relatively more abundant in developing countries.
5. The poor are concentrated in the informal sector, its promotion would ensure more equitable distribution of the benefits of development and faster reduction in poverty.

Disadvantages of Urban Informal Sector
URBAN UNEMPLOYMENT
Policies for the Urban Informal Sector
1. Remove policies which discourage informal sector.
2. Provide information and training facilities.
3. Increased access to capital and credit.

In most of the developing countries, urban unemployment has been very high. Generally, it has been higher than the rural unemployment. Major reason for higher unemployment has been high level of rural-urban migration.
MIGRATION AND DEVELOPMENT
Rural-urban migration aggravates the structural imbalances in two ways. Firstly, migration increases the labor supply in the urban areas and depletes the human capital in rural areas.
Secondly, job-creation in urban areas requires more resources relative to urban areas, reducing the resources available to rural areas.

TOWARD AN ECONOMIC THEORY OF RURAL - URBAN MIGRATION
The TODARO MODEL postulates that migration proceeds in response to urban - rural differences in expected income rather than actual earnings.
The fundamental premise is that migrants consider the various labor market opportunities available to them in the rural and urban sectors and choose the one that maximized their expected gains from migration

Basic Characteristics:

1. Migration is a rational decision, by economic considerations.

2. The decision to migrate depends on expected rather than actual urban-rural real wage differential.

3. The probability of obtaining a city job is inversely related to the urban unemployment rate.

4. High rates of migration are outcomes of rural urban imbalances.

Five policy implications:

1. Urban bias in the development policy aggravates the urban unemployment problem.
2. Faster job-creation in the urban areas is insufficient solution to the urban unemployment problem.
3. Indiscriminate educational expansion leads to further migration and unemployment.
4. Providing wage subsidy in the urban area may increase urban unemployment.
5. Programs of integrated rural development should be encouraged.


ELEMENTS OF COMPREHENSIVE MIGRATION AND EMPLOYMENT STRATEGY

1. Creating an appropriate rural-urban economic balance.
2. Expansion of small-scale, labor-intensive industries.
3. Eliminating factor-price distortions.
4. Choosing appropriate labor-intensive technologies of production.
5. Modifying the linkage between education and employment.
6. Reducing population growth.
7. Decentralizing authority to cities and neighborhoods

THANKS!!
Components of Migration
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