Rural-to-urban migration, human capital, and agglomeration |
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Authors: | C Simon Fan Oded Stark |
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Institution: | aLingnan University, Hong Kong, China;bUniversity of Klagenfurt, Austria;cUniversity of Bonn, Germany;dUniversity of Vienna, Austria;eWarsaw University, Poland;fWarsaw School of Economics, Poland |
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Abstract: | A new general-equilibrium model that links together rural-to-urban migration, the externality effect of the average level of human capital, and agglomeration economies shows that in developing countries, unrestricted rural-to-urban migration reduces the average income of both rural and urban dwellers in equilibrium. Various measures aimed at curtailing rural-to-urban migration by unskilled workers can lead to a Pareto improvement for both the urban and rural dwellers. In addition, the government can raise social welfare by reducing the migration of skilled workers to the city. Moreover, without a restriction on rural-to-urban migration, a government's efforts to increase educational expenditure and thereby the number of skilled workers may not increase wage rates in the rural or urban areas. |
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Keywords: | Rural-to-urban migration The externality effect of the average level of human capital Agglomeration economies Public policies |
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