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INTERNAL MIGRATION RESTRICTIONS AND LABOR ALLOCATION IN DEVELOPING COUNTRIES

Economics Department, Indiana University — Purdue University Indianapolis (IUPUI), 420 University Blud, Indianapolis, IN 46202, USA

E-mail Address: prangaza@iupui.edu

Corresponding author.

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and

XIAOBING WANG

Economics Department, University of Manchester, Oxford Rd, Manchester M13 9PL, UK

E-mail Address: wang-xiaobing@manchester.ac.uk

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https://doi.org/10.1142/S0217590817470051Cited by:7 (Source: Crossref)

This article is part of the issue:

Special Issue on Current Issues in Developing Economies; Guest Editor: Mehmet Huseyin Bilgin, Istanbul Medeniyet University

Abstract

We develop a simple model with endogenous rural–urban migration to analyze the implications of migration restrictions for economic welfare. The model reveals that a combination of an efficient urban bias in public service provision and internal migration restrictions can raise social welfare. Our results suggest that migration restrictions should be carefully assessed as a policy choice rather than immediately dismissed as suboptimal. However, even when restrictions raise social welfare, they increase urban households’ welfare at the expense of rural households’ welfare, creating an equity tradeoff for policy-makers to consider.

Keywords:

JEL: J31, O18, O23, O53, R13

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