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Urbanization in ME NA
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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

• Many ME NA countries experience rapid
• urban population growth because of
• Natural increase birth rate gt 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
  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
  (e.g., Cairo)

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The Lewis Development Model

• Rural agricultural sector
• Low or even zero Marginal Product of Labor so
  that labor is a redundant factor and wage rate is
  at the subsistence level
• Urban industrial sector
• Rising demand for unskilled labor to be trained
  for industrial growth results in greater
  employment and more profits and higher wages
• Rural-Urban migration
• To find jobs and earn higher wages

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Demand for Labor
Wage
R Rural U Urban W Wage E Employment D
Labor Demand S Labor Supply
Profit
WU
SR
Investment in urban areas increases the demand
and employment for rural labor.
WR
Wage
DU2
DU1
E2
E1
Employment
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Criticisms of Lewis Model

• Industrial technology is generally capital
  intensive/labor-saving. Hence, the demand for
  unskilled rural labor would not increase
  employment
• Industrialization must be supported by
  agricultural development to supply an
  ever-increasing supply of food items and raw
  materials

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Demand for Labor
Wage
No increase in employment when technology is
labor saving
Profit
SR
WU
WR
Wage
DU1
DU2
Employment
E1 E2
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Todaros R-U Migration Model

• Factors affecting migration decision
• Expected urban income
• Probability of finding an urban job
• Cost of living in urban areas
• Decision criterion
• Migration will take place if the expected
  benefits exceed the costs (in present value)

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Todaros Framework of Migration Decision
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Todaros R-U Migration Model

• Benefits from migration
• Difference between expected urban income and
  rural income (R-U wage differential)
• Psychic benefits
• Costs of migration
• Transportation cost
• Opportunity cost of being unemployed
• Difference in living expenses
• Psychic costs

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Todaros R-U Migration Model

• Non-economic factors inducing migration
• Distance
• City lights movie theaters, restaurants, etc.
• Relative living in urban areas helping reduce
  living expenses
• Information flow about job openings in the
  informal sector

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Policies Inducing R-U Migration

• Neglect of agriculture
• Urban bias development strategies
• Job creation in urban areas
• Educational opportunities R-U brain drain
• Urban wage subsidies

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Policies Reducing R-U Migration

• Eradicate poverty and reduce population growth
• Promote rural and agricultural development
• Expand small-scale, labor-intensive industries
• Eliminate factor-price distortions and adopt
  appropriate production technologies
• Modify direct link between education and
  employment

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Rapid Urbanization Problems

• Congestion and pollution
• Unemployment and underemployment
• Overcrowding and crime
• Insufficient accommodation such as housing and
  transportation
• Possibility of political unrest