Working Paper: CEPR ID: DP769
Authors: Subrata Ghatak; Paul Levine
Abstract: This paper presents a critical survey of theories of migration, their welfare and policy implications and their empirical relevance. We also develop some extensions to the theory beginning with a general encompassing model of migration which treats the Harris and Todaro (HT) model as a special case. In particular, we show how standard policy, a reduction of the wage gap between an advanced and a backward region to reduce the rate of migration, follows from the standard model, but ceases to be valid if borrowing constraints on the potential migrant are introduced. The HT model is extended to examine risk-averse behaviour within families where the migration of members of families serves to diversify risk. The welfare implications of the individual migration decision and government intervention in the form of employment subsidies are also examined.
Keywords: migration; Harris-Todaro; employment subsidies
JEL Codes: F22; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reducing the wage gap between advanced and backward regions (R11) | decrease migration rates (J11) |
| borrowing constraints (F34) | decrease migration rates (J11) |
| financial capabilities of potential migrants (F24) | effectiveness of wage gap reduction policies (J38) |
| family members migrate (F22) | pool incomes (D31) |
| migration serves as a strategy to diversify risk (F22) | family decision-making influences migration decisions (J12) |
| job creation in urban areas (R11) | increase migration rates (F22) |
| increase migration rates (F22) | higher urban unemployment (R23) |
| urban job creation efforts (J68) | exacerbate migration flows (F22) |