Ecomomics evelopment 10th y p todaro and smith chapter 07

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

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Urbanization and Development
• Economic development causes urbanization
• There is a positive correlation with economic
development and urban population growth

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Urbanization and Development

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Urbanization Across
Time and Income

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Urbanization Trend
World urban population distribution (in billions)

2000

2025

World

3.2

5.1

MDCs

1.0 (31%)

1.1 (22%)

LDCs

2.2 (69%)

4.0 (78%)

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Distribution of Urban Population
Urban population shares of Asia and Africa are
expected to rise at the expense of Latin America:

2000
Africa

18%

2025
20%

Latin America

22%

15%

Asia

60%

65%

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7-6

Urbanization in the World

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Projected Urban and Rural Population
MDCs and LDCs, 1950-2030

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Most Populated Cities
• Of the 15 largest cities, 4 are in MDCs (LA, NY,
Tokyo, and Osaka) and 11 are in LDCs
• By 2015, the ranking of these largest cities will
change in favor of the LDCs (e.g., NY falls from
no. 3 to 11)

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Largest Cities in the World

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Mega-Cities:
Cities with 10 Million+ Inhabitants

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Size of Largest Cities

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7-12


Location of Migrant Workers
• Migrant workers move to nearby towns and large
cities, and especially the capital city
• They reside in slums and shanty towns where low cost
housing is available

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Slums in Urban LDCs

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Urbanization
The LDCs experience rapid urban population
growth because of
• Natural increase: birth rate > death rate
• Rural-urban migration: movement of rural workers to
urban areas

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Contribution of R-U Migration
• On average, about 50% of urban population growth of
the LDCs is due to R-U migration
• Rapid R-U migration has resulted in the construction
of slumps and shanty towns that house a large
percentage of urban population

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Extent of R-U Migration

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Components of Migration

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Dualistic Economic Structure
• Formal sector: organized and regulated economic
system (e.g., government agencies, banks); it
generates 2/3 of GDP
• Informal sector: fragmented and unregulated
economic system (e.g., street vendors, loan sharks);
it generates 1/3 of GDP

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Dualistic Labor Market
• Formal labor market: skilled labor (e.g., government
employees, teachers) and professionals with
education and license
• Informal labor market: semi-skilled and unskilled
labor (e.g., small business, street vendors)

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Urban Informal Sector
• Most rural migrants find jobs in the
“informal” urban labor markets
• The “informal” urban labor force is
a large component of the urban
labor force
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Informal Urban Labor Force

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Informal Employment

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Developing Urban Informal Sector
Advantages of investment in urban “informal”
sector
• Contributes to economic growth
• Requires small capital investment
• Requires low cost of training and education
• Supplies semi-skilled labor to industry
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Uses labor-intensive
technology to create jobs
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Developing Urban Informal Sector
Disadvantages of investment in the urban
“informal” sector
• Induces R-U migration
• Exerts pressure on urban infrastructure
• Adds to pollution, congestion, and crime

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