Rural-Urban Migration and Unemployment: Theory and Policy Implications

Reprint No. 2011:8

Author(s): Yves ZenouYear: 2011 Title: Journal of Regional Science Volume (No.): 51 (1) Pages: 65–82
Online article (restrictions may apply)

We develop a regional model where, in the city, unemployment prevails because of too high (efficiency) wages, while, in the rural area, workers are paid at their marginal productivity. We characterize the steady-state equilibrium and show that it is unique. We then consider two policies: decreasing urban unemployment benefits and subsidizing urban employment. We find that decreasing the unemployment benefit in the city creates urban jobs and reduces rural–urban migration since new migrants have to spend some time unemployed before they can find a job in the city. On the other hand, raising employment subsidies increases urban employment but may also increase urban unemployment because it triggers more rural–urban migration. In this respect, the employment subsidy policy can backfire by raising rather than reducing urban unemployment.

Zenou, Yves (2011), "Rural-Urban Migration and Unemployment: Theory and Policy Implications". Journal of Regional Science 51(1), 65–82.

An Agenda for Europe

Institutional Reform for Innovation and Entrepreneurship

Omslag 2017 Institutional Reform for Innovation and Entrepreneurship.jpg

The authors of this book, Niklas Elert, Magnus Henrekson and Mikael Stenkula, advise the economies of the European Union to become more entrepreneurial in promoting innovation and economic growth. The authors propose a reform strategy with respect to several aspects to achieve this goal.


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