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Title: Cities, Towns, and Poverty: Migration Equilibrium and Income Distribution in a Todaro-type Model with Multiple Destinations

Author(s): Luc Christiaensen, Joachim De Weerdt and Ravi Kanbur

Publication Date: April 2017

Keyword(s): Equilibrium Income Distribution, Migration Equilibrium, Poverty Gradient, Poverty Reduction, Secondary Towns versus Big Cities and Todaro Model

Programme Area(s): Development Economics

Abstract: Should public investment be targeted to big cities or to small towns, if the objective is to minimize national poverty? To answer this policy question we extend the basic Todaro-type model of rural-urban migration to the case of migration from rural areas to two potential destinations, secondary town and big city. We first derive conditions under which a poverty gradient from rural to town to city will exist as an equilibrium phenomenon. We then address the policy question and show how the answer depends on the migration response, where the poverty line lies relative to incomes in the three locations, and at times also the poverty index itself. In particular, we develop sufficient statistics for the policy decisions based on these income parameters and illustrate the empirical remit of the model with long running panel data from Kagera, Tanzania. Further, we show that the structure of the sufficient statistics is maintained in the case where the model is generalized to introduce heterogeneous workers and jobs. Overall, the findings confirm that, given migration responses, national poverty outcomes are not immune to whether urban employment generation takes place in the towns or the city.

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Bibliographic Reference

Christiaensen, L, De Weerdt, J and Kanbur, R. 2017. 'Cities, Towns, and Poverty: Migration Equilibrium and Income Distribution in a Todaro-type Model with Multiple Destinations '. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11994