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Production Linkages and Rural-Urban Migration

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  • Kul B. Bhatia

    (Department of Economics, University of Western Ontario)

Abstract

Flexible production linkages between the rural and urban sectors are incorporated into the Harris Todaro (HT) model. Each sector uses a part of the other¡¯s output as an intermediate input in a small open economy. Implications of separability, elasticities of substitution, and input complementarity in a three-input production function are examined. The intermediate input in the minimum-wage sector has a more pervasive influence than its counterpart in the rural sector. The well known HT result from a final-goods-only (FGO) specification that an increase in expected urban wage causes an outmigration from the rural sector does not hold under several parametric configurations. Unlike the case of a non-traded intermediate good used in fixed proportions, an urban wage subsidy may lower rural employment, as in the FGO specification.

Suggested Citation

  • Kul B. Bhatia, 2001. "Production Linkages and Rural-Urban Migration," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 26(2), pages 1-16, December.
    • Handle: RePEc:jed:journl:v:26:y:2001:i:2:p:1-16
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