Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/161315
Authors: 
Christiaensen, Luc
De Weerdt, Joachim
Kanbur, Ravi
Year of Publication: 
2017
Series/Report no.: 
IZA Discussion Papers 10692
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.
Subjects: 
secondary towns versus big cities
poverty reduction
poverty gradient
Todaro model
migration equilibrium
equilibrium income distribution
JEL: 
O18
O41
I3
J61
Document Type: 
Working Paper

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