Chapter 7.2 notes

They may not be risk neutral o there may also be a

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Unformatted text preview: rmal sector wage Wt is greater than zero o Probability of unemployment may not be simply ratio of jobs to job seekers o For example, the probability of employment may increase the longer the time spent in the city o Potential migrants look at present discounted value of lifetime income o Migrants may consider expected utility, not just average income, they may not be risk neutral o There may also be a risk to income in rural areas o Moving cost may be significant - The Case for policy o Migration can be understood as rational, so why would be need policy? o Market failures are present o Negative externalities to cities eg: infrastructure o Negative externality to rural areas: loss of relatively better skilled workers o Inefficiently large city scales o Unemployment resources o Other negative externalities: health, etc o Policy implications o Reduce or elimi...
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This document was uploaded on 04/10/2014.

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