Jk. Brueckner et Ha. Kim, Land markets in the Harris-Todaro model: A new factor equilibrating rural-urban migration, J REG SCI, 41(3), 2001, pp. 507-520
Recent research in the Harris-Thdaro (HT) tradition has added an important
new element to the model by incorporating an urban land market. Brueckner a
nd Zenon (1999) (hereafter BZ) argue that a model where migration equalizes
expected wages between city and countryside may overlook another important
force that equilibrates the process of rural-urban migration. This force i
s the mig-ration-induced rise in the urban cost of living, which occurs pri
ncipally through escalation of urban land rents as the city population expa
nds. Land-rent escalation, which tends to limit rural-urban migration, prov
ides an important additional force that may help determine city sizes in de
veloping countries. The present paper provides a simpler alternative to BZ'
s analysis by assuming that urban residents smooth their income as they cyc
le between formal and informal employment. This allows migration decisions
to be based on the expected wage, as in the usual HT framework, in a model
that includes a land market. The analysis shows that this modified framewor
k generates results slightly different from those of BZ.