Chapter 7: Urbanization and Rural-Urban Migration: Theory and Policy Flashcards Preview

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Flashcards in Chapter 7: Urbanization and Rural-Urban Migration: Theory and Policy Deck (15)
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Urban Bias

The notion that most governments in developing countries favor the urban sector in their development policies, thereby creating a widening gap between the urban and rural economies.


Rural-urban migration

The movement of people from rural villages, towns, and farms to urban centers (cities) in search of jobs.


Agglomeration Economies

Cost advantages to producers and consumers from location in cities and towns, which take the forms of urbanization economies and localization economies.


Urbanization Economies

Agglomeration effects associated with the general growth of a concentrated geographic region.


Localization Economies

Agglomeration effects captured by particular sectors of the economy such as finance or autos, as they grow within an area.


Social Capital

The productive value of a set of social institutions and norms, including group trust, expected cooperative behaviors with predictable punishments for deviations, and a shared history of successful collective action, that raises expectations for participation in future cooperative behavior.



An action taken by one agent that decreases the incentives for other agents to take similar actions. Compare to the opposite effect of a complementarity.


Informal Sector

The part of the urban economy of developing countries characterized by small competitive individual or family firms, petty retail trade and services, labor-intensive methods, free entry, and market-determined factor and product prices.


Todaro migration model

A theory that explains rural-urban migration as an economically rational process despite high urban unemployment. Migrants calculate (present value of) urban expected income (or its equivalent) and move if this exceeds average rural income.


Harris-Todaro model

An equilibrium version of the Todaro migration model that predicts expected incomes will be equated across rural and urban sectors when taking into account informal-sector activities and outright unemployment.


Present Value

The discounted value at the present time of a sum of money to be received in the future.


Labor Turnover

Worker separations from employers, a concept used in theory that the urban-rural wage gap is partly explained by the fact that urban modern-sector employers pay higher wages to reduce labor turnover rates and retain trained and skilled workers.


Efficiency wage

The notion that modern-sector urban employers pay a higher wage than the equilibrium wage rate in order to attract and retain a higher-quality work-force or to obtain higher productivity on the job.


Induced migration

Process in which the creation of urban jobs raises expected incomes and induces more people to migrate from rural areas.


Wage subsidy

A government financial incentive to private employers to hire more workers, as through tax deductions for new job creation.