Urbanization and Rural-Urban Migration PDF

Urbanization and Rural-Urban Migration together to enhance efficiency through knowledge spillovers. Urbanization trends and living conditions Firms benefit from operating in - The more high-inco...

Urbanization and Rural-Urban Migration together to enhance efficiency through knowledge spillovers. Urbanization trends and living conditions Firms benefit from operating in - The more high-income developed well-established districts for marketing the economy, the more urbanized it advantages where potential customers is know to shop for the best selection. - The casualty remains unclear - Many argue developing countries Think of how car repair shops are so close are often excessively urbanized to each other or how certain cities in the world are known for a certain trade such Urbanization: Trends and projections as watchmaking, shoe-making, or bag-making. The Roles of Cities Agglomeration Economies: Urbanization Urbanization, Costs, and Efficient Urban (General) economics, localization (industry Scale or sector) economies. Saving on Along with efficiencies, and other potential firm-to-firm, from-to-consumer benefits, cities also entail “congestion transportation costs” Economies in this case refer to cost The most economically efficient urban scale advantage. is found where the average costs of production for industries are the lowest Firms usually locate themselves near the workers with the skills they need and Generally, differing efficient scales for vice-versa. You wouldn't live in Batangas if different industrial specializations imply your office is all the way in QC. different city sizes Firms benefit from knowledge spillovers in Higher capital-labor ratios and their own and related industries. In general, infrastructure are required in urban close proximity to many people may areas through housing and increase the rate of innovation or transportation. productivity more generally. Smaller cities may be expanded in There are more options and amenities in an labor-intensive developing countries urban environment than rural one. It’s a question of scale. If you are larger Industrial Districts and Clustering than what your scale’s max is, it will Quality of clusters, or industrial districts, is result in larger costs. widely viewed as a key to sectoral efficiency The Urban Giantism Problem Industrial districts comprise firms in the There may be general urban bias because same or closely related activities, clustered of the fact that the development is so rapid in urban areas compared to rural areas. Something we call First-City Bias where - Uses appropriate technologies, local the largest city is prioritized over rural cities. resources - Recycling of waste materials Cities are capital-intensive, so one may - More benefits to poor, especially have expected huge cities to be more women who are concentrated in the commonly located in developed countries informal sector but urbanization in developing countries has - Policies for the urban informal sector taken place at an unexpectedly rapid pace. Migration and development Huge informal sectors in shantytowns, and Policy view about rapid-to -urban migration favelas. A large fraction of workers are and urbanization have varies over time outside formal sectors. First from a more positive view, then to a Much urban growth is in midsize cities, but more negative view, with a middle ground urban bias remains a serious issue in prevalent today. Still, for many countries this many developing countries migration is greater than the urban areas’ abilities to create jobs and provide social Note: Urban bias is a government issue services. Import substitution industrialization: less Migration can lead to a brain drain, trade, there is an incentive to concentrate in especially in rural areas and when the a single city largely to avoid transportation educated leave, the burden of maintaining costs. those schools get increasingly difficult. Hub and spoke transportation system Harris-Todaro Migration Model makes transport costs high for small cities. An equilibrium version of the the Todaro migration model that predicts that expected incomes will be equated across rural and urban sectors when taking into account informal-sector activities and outright employment. The Urban Informal Sector Why promote the urban informal sector - Generates surplus despite an often- hostile environment - Creating jobs due to low capital intensity - Access to (informal training), and apprenticeships Demand for agriculture is the usual demand - Creates demand for curve, the demand for manufacturing starts less-skilled/unskilled workers on the opposite side but is still downward Limitations sloping. The H-T model only explains those who migrate with sufficient skills to compete If you simply allow demand and supply to for modern jobs. be, then at point E, the wages of both agriculture and manufacturing will reach In practice, an economy may not be near an equilibrium, ending migration. equilibrium: sometimes, even traditional urban wages are higher than rural traditional But since the government imposes a wages. higher wage in manufacturing, the demand for labor in manufacturing Simple models such as this work well in decreases as costs for labor increases. some regions but not all thus there needs to be an expansion of the concept to include This changes the equilibrium point to Z. those who intentionally migrate to work in Since the higher wage in manufacturing is the traditional uran sector. more enticing, more people from agriculture will migrate to The Market Failure Case for Migration manufacturing. and Urbanization Policy The only way to justify government intervention is when there is market failure but that discounts the fact that the governments themselves can be the cause of market failure. This is the probability of urban job success necessary to equate the agricultural income The government needs to be unbiased to with urban expected income. the rural and urban sector - they need to develop at a similar pace lest it create more Assumptions problems. 1. Traditional Wage = 0 2. One period Policy for Rural-Urban Migration 3. Income is the only thing valued Reduce urban bias that would shift 4. Risk Neutrality expectations and therefore allow those in 5. No Moving Costs the rural sector stay in the rural sector. 6. All are migrating to seek modern jobs Improve education in the rural sector. 7. Rural income is known with certainty Encourage programs of integrated rural development including attention to more These assumptions can be relaxed with inclusive rural institutions. more elaborate models. The Central Role of Education and When you do urban planning, you need to Health think about how averse to risk people are. Health and education are important objectives of developpment as discussed previously. Furthermore, health and education are also important components for growth. Health and education are investments in the same individual. Investments in health will result in greater returns if you are educated and vice-versa. Healthier students learn more effectively, healthier people have lower depreciation of education capital. Education is needed to keep people healthy and to train Returns from primary education is higher healthcare professionals. than tertiary education. An increase in income often do not lead to Child Labor substantial increases in investment in Child labor is a widespread phenomenon. children’s education and health. But better The problem may be modeled using a educated mothers tend to have healthier multiple equilibria approach. Government children at any income level. intervention may be called for to move to a better equilibirum. Active intervention is only Better education and health lead to a needed at first. stream of higher income in the future. Private returns to education are often Assumptions high. Luxury Axiom A household with sufficiently high income would not send its children to work Substitute Axiom Adult and chiild labor are substitutes, in which the quantity of output by a child is a given fraction There can be multiple equilibria, with sufficiently elastic labor demand.  Social versus Private Benefits and Costs These could augment net social returns on literacy spillover benefits. But net social returns could diminish are overstated by public subsidies for private education. The “Missing Women” Crisis Research has concluded that in Asia, at least 100 million women are “missing” Reasons include inferior medical care for girls and gender selective abortion. Agricultural Transformation and Rural Development The Imperative of Agricultural Progress When the real value of wages go lower, and Rural Development that’s when people start using whatever Overly heavy emphasis on rapid means they have to generate income industrialization may have had negative whether that is children or senior citizens. impacts on rural development Other Approaches to Child Labor Policy Agricultural development is now seen as an Help get more children into school by important part of any development strategy. building new village schools and When talking about development, you have providing enrollment incentives for parents to simply start with agriculture. Use agriculture as the stepping stone for Consider child labor an expression of developing industry. poverty, so emphasize ending poverty generally, rather than child labor directly. Three complementary elements of agriculture - and employment-based If child labor is inevitable in the short run, strategy regulate it to protect children, and to provide 1. Accelerated output growth support services for working children. 2. Rising domestic demand for agricultural putput Ban child labor, if impossible, ban it in its 3. Non-agricultural labor intensive rural most abusive forms. development activities that are supported by the farming community Educational Systems and Development The Political Economy of Educational Contributions of Agriculture to Supply and Demand which is the Economic Development relationship between employment A schema introduced by Simon Kuznets; opportunities and educational demands. implicity still treats industrialization as the development goal - Product contribution - Foreign exchange contribution  - Market contribution Potential Roles for Government in - Factor contribution Agricultural Development - Addressing - Labour contribution Market Failure Reducing environmental externalities A lot of developed countries have their Implementing agricultural research and share of agriculture in GDP has fallen. That extensions services to overcome however does not mean that agriculture is information and education market failures lower but perhaps they may have either maintained or increased agricultural Helping create missing markets like output while the productivity of the other weather insurance or credit. Addressing sectors skyrocketed. monopoly power in input supply and monopsonistc power where it persists in This will ensure you are not too dependent markets. on imports for basic necessities. Helping to achieve economies of scale in Agricultural Growth: Past Progress and marketing. Overcoming informational Current Challenges asymmetries in product quality. Although agriculture employs the majority of the developed country labor force, it Providing needed infrastructure. Institutional accounts for a much lower share of total reform as needed; maintaining good output. institutions which ensures shared growth in the agricultural sector and addressing Institutions take time to develop. The poverty traps. right rules and policies, the level of experience. There is a lot of room with Overall, having a robust agriculture government intervention to keep the benefits society as a whole - even those productivity of agriculture intact. who are not involved in the transaction. Agriculture is a merit good which then With the CREATE Law in effect, the makes it the responsibility of the government is taxing the lower income government like how wages should be. businesses while protecting large corporations. Incentives Under Sharecropping (9.7) Agriculture is risky because you cannot Agricultural Growth: Past Progress and physically move the land. Current Challenges Malnutrition and famine inspires calls for a The microeconomics of farmer behavior new green revolution focus in Africa. and agricultural development The transition to mixed and diversified farming to specialization: modern commercial farming. Shifts may require supportive policy, government or NGOs; farmers may be unable to take advantage of these opportunities in response to markt forces alone. Recapitualtion: Potential Roles for Note: with a cost to switching to Government in Agricultural Develoment specialization and modern methods, – Addressing Market Failure multiple equilibria are possible. You can’t expect the private sector to provide living wages for the workers but it is Core Requirements of a Strategy of good for society to give them a living wage. Agricultural and Rural Development Improving small scale agriculture Roles: - Agricultural extension programs 1. Reducing environmental - Technological and innovation externalities - Institutional and pricing policies: 2. Implementing agricultural research providing necessary economic and extension services to overcome incentives information and education market - Adapting to new opportunities and failures constraints 3. Helping to create markets where they are missing - eg. for weather Conditions for Rural Development insurance or credit 1. Land Reform 4. Addressing monopoly power in input 2. Supportive policies supply 3. Integrated Development Objectives 5. Addressing monopsonistic power where it persists in local labor The institutions in your economy make markets - and output markets or break the future of the economy. If 6. Helping to achieve economies of your institutions are extractive in nature, scale in marketing then the problem will continue to persist. 7. Overcoming informational asymmetries in product quality You have to create and rebuild 8. Providing needed infrastructure institutions to make them more 9. maintaining/enforncing good inclusive. institutions - in sense of Ch.2,systematically applied to rural Land Reform areas including reform as needed The deliberate attempt to reorganize and 10. Ensure shared grwpth in agriculture transform agrarian systems with intention sector (merit good) of fostering more equal distribution of 11. Addressing poverty traps( merit agricultural incomes and facilitating rural good) development Enviroment and Development Transfer land ownership or control to the Environmental issues affect, and are people who actually work on the land affected by, economic development. There is only a scarce amount of resources in A strong agricultural sector, benefits the the world and it shows that classic market entire society. failures lead to too much environmental - Airborne pollutants degradation. Poverty and lack of education may also lead Victims to non-sustainable use of environmental - The poor live in environmentall resources. degraded lands which are less epxensive because rich avoid them Global warming and attendant climate - People living in poverty have less change is a growing concern in developing political clout to reduce pollution economies. where they live - Living in less productive polluted The Basic Issues lands give the poor less opportunity Sustainable development and to work their way out of poverty environmental accounting Population, resources and the environment Agents: Poverty and the environment - The High Fertility rate of people Growth vs. Environment ? living in poverty Rural development and the environment - Short time horizon of the ppor by necessity Important topics - Land Tenure Insecurity - Incentives for Ranforest Urban development and the environment Resettlement The global environment and economy Sustainability and Economic Analysis Sustainable development has been defined Nature and pace of greenhouse gas - as: induced climate change Meeting the needs of the present generation Natural Resource-Based Livelihoods as a without compromising the wellbeing of Pathway Out of Poverty: Promise and future generations. Limitations To a large extent, sustainable develo[ment The scope of domestic-origin environmental can be studied using longstanidng contacts degradation: an overview of economic analysis. These include the following 3 tools Environmental problems have consequences both for health and First: productivity Using an appropriate valuation of future - Loss of agricultural productivity social benefits - usually involving valugin the - Prevalence of unsanitary conditions future at a significantly higher rate than created by lack of clean water and does the market sanitation - Dependence on biomass fuels and pollution Second: Hypothetical Income-Pollution Paying proper attention to market failures Relationship: Environmental Kuznets (focusing on externalities and public goods. Third: Explicitly valuing resources as a form of capital stock rather than just a stream of consumption. Environment and development: Sustainability has been defined as Inverted-U observed for such items as* “meeting the needs of present - Lead generation without compromising the - Sulfur dioxide wellbeing of future generations” - Particulate matter in the air - Nitrogen oxide Therefore: running down the capital stock is Decreasing pollution observed throughout not consistent with the idea of sustainability. e.g. in Environmental and other forms of capital - Water quality are substitutes only to a degree; eventually - Basic sanitation they likely act as complements. And increasing pollution observed In developing countries, environmental throughout - so far and in most cases - in capira is generally a larger fraction of total other important items including capital. To know whether environmental - Greenhouse Gasses capital is increasing or decreasing, we - Biodiversity should look at the sustainable net national - Landfill volumes income. 𝑁𝑁𝐼 * = 𝐺𝑁𝐼 − 𝐷𝑚 − 𝐷𝑛 Explanations for the Kuznets Curve NNI* is the sustainable net national income. Institutional Reforms, not market 𝐷𝑚 is the depreciation of manufactured mechanisms. Public Good provision. Private capital assets Sector Action. Scope of Voluntary action 𝐷𝑛 is the depreciation of environmental including NGOs, Locus of curves depends on factors such as institutional quality and capiral assets evolution over time. Local vs Regional vs National vs Global. You might celebrate at a 6.5% increase in GDP but that growth might not be Pathways Out of Poverty With sustainable. Environment. As you develop the environmental conditions, you should be able to solve the poverty problem at the same time. In low income countries, high dependence on natural resources: agriculture; animal husbandry, fishing, forestry, hunting, foraging. As you create more value chains, you have to be aware of how it impacts global warming and how you might be able to use technology to become more efficient. Global Warming and Climate Change: Scope, Migration, and Adaptation 1. Growing sources of emissions from developing countries. 2. Strategies for mitigation a. Taxes of carbons b. Subsidize to encourage technological progress 3. Adaptation a. Planned b. Autonomous