Chapter11 Migration-10

Chapter11 Migration-10 - de Janvry and Sadoulet Chapter 11...

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de Janvry and Sadoulet 1 10/11/10 Chapter 11 Labor and Migration October 10, 2010 With generally rapid population growth and insufficient creation of new employment opportunities, developing countries are facing a huge employment problem. Because labor is the main asset that poor people have, creating opportunities for them to use this asset productively is by far the main instrument for poverty reduction. No surprise, then, that providing employment opportunities in remunerative activities, elevating the level of skills of the labor force, and pacing migration between rural and urban destinations to avoid the expansion of urban slums is a major development issue. In this chapter, we first look at the logic of employment in the formal and informal sectors. We then look at two bodies of theory that aim at explaining why people migrate: one when the decision to migrate is taken at the individual level; the other when it is taken at the household level. We then consider international migration and look at the impact of migration at four levels: on the community from which the migrant came, on the country where domestic migration is happening, and on both the emitting and the receiving countries for international migration. I. Labor and employment 1. The employment problem in developing and industrialized countries The employment problem takes on different forms in different countries. In the developing countries, few people can afford to be openly unemployed. Because there is typically no formal social assistance provided to the unemployed, everybody has to in some way generate a living, with different degrees of success. This is the role of the informal sector. It is a sector where entry is easy, labor productivity is low, labor regulations such as paying the legal minimum wage and respecting work safety codes are not enforced, taxes are not paid, social benefits are missing, and value added is generally not counted in GDP (though often guesstimated). Informal sector employment can range Take home messages for Chapter 11 1. The labor market is highly dualistic, with a formal sector offering wages above the full employment equilibrium, and surplus labor accumulating in the informal sector with low wages and harsh work conditions. 2. Migration is an integral component of development, involving both rural-urban and international population movements. 3. The Todaro model explains domestic migration as a labor market failure, whereby high urban formal sector wages induce migration of individuals until unemployment is sufficient to lower the expected wage to the current wage in the emitting rural areas. Migration can thus continue to occur even with very high levels of unemployment. 4. Migration decisions are generally part of a household strategy, where the migrant is expected to send remittances back to the emitting household. This requires understanding why migrants remit, and there are many motivations involved from altruism to trade.
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This note was uploaded on 02/09/2011 for the course ECON c171 taught by Professor Alaindejanvry during the Fall '10 term at Berkeley.

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Chapter11 Migration-10 - de Janvry and Sadoulet Chapter 11...

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