Pranab Bardhan and Christopher Udry

in Development Microeconomics

Published in print May 1999 | ISBN: 9780198773719
Published online November 2003 | e-ISBN: 9780191595929 | DOI:

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Begins with a discussion of why industrialization is usually accompanied by the concentration of industries in urban areas. It then introduces the Harris–Todaro model, which has been the dominant model of migration in the subject of economic development. In this model, a relatively high, exogenously fixed manufacturing wage pulls rural workers to the urban formal sector, migration ceasing only when the urban informal sector is large enough to equalize the rural wage with the expected urban wage. A subsequent model uses the fact of asymmetric information between employers and employees that leads to adverse selection to make the high manufacturing wage endogenous. The concluding model incorporates forward‐looking behaviour, selection, job search in the city, and the role of immigrant worker network in this search.

Keywords: adverse selection; asymmetric information; economic development; formal sector; Harris–Todaro model; immigrant network; industrialization; informal sector; job search; migration

Chapter.  5266 words.  Illustrated.

Subjects: Economic Development and Growth

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