URBAN LABOR MARKETS AND DEVELOPMENT

Economic growth and the distribution of its benefits dependon how well the labor market mobilizes human resources in newactivities, locations, and skills. This article surveys theliterature on the functioning of labor markets in developingcountries. It shows that broad analyses of population, nationalincome, and urbanization dominated early thinking, but therewas little detail on how rural and urban labor markets functioned.The urban economies were seen as being dominated by high-wagemodern sector employment, which provided the motive for rural-urbanmigration. Although migrants swelled the ranks of the urbanunemployed, wages were said to remain high because of organizedpressures that spanned the urban economy and encouraged a chronicexcess of job seekers and urban problems. Current research, in contrast, shows that the urban economyis quite diverse and economic growth has increased the rangeof opportunities. A considerable number are in viable self-employmentand small-scale economic activity with variable economic returns.However, many are denied access to opportunity because of thelimited employment, credit, and educational infrastructure.Accelerated development and broadened access will thus strengthenthe effectiveness of the labor market in a strategy of growthwith equity.