Migration, urban unemployment and marketing surplus in developing economies

Abstract

Introduction: This dissertation starts by looking at the problem of rural-urban migration in the developing countries. In doing so we come across what seems to be an apparent contradiction in the literature on economic development. The traditional view on economic development suggests that increasing urbanization is not only an indicator of economic development but also is a precondition for transition from an underdeveloped to a developed economy. However, recent literature on internal migration seems to view urbanization as a constraint on economic development. We have argued that the recent concern is not about urbanization per se, but about “over-urbanization”, i.e. a rate of urbanization which far exceeds the rate at which jobs can be created for the migrants from the rural areas in the urban sector. However, as relatively few urban centres in the developing countries offer hope of an alternative source of employment to the unemployed labour force of the rural sector, rural labour migrates to a very few urban centres creating excessive pressure on the existing facilities. In Section I of Chapter 1, we have discussed the factors behind urbanization and tried to find out why the process of urbanization was less painful in the developed countries their early period of industrialization, compared to the Third World countries of today. In Section II of the same chapter , we have taken a detailed look at the policies being followed by some the developing countries to alleviate the problems of over-urbanization. After taking a critical look at the recent migration literature in Chapter 2, in Chapter 3 we have constructed a model of the dual economy à la Lewis, with rural-urban migration. In Chapter 4, we have argued that the problem of over-urbanization is actually a symptom of a greater problem, that of unemployment both rural and urban. Historical experience tells us that jobs created will have to ne in the non-agricultural sector. However, growth of the non-agricultural sector depends crucially on the availability of surplus food grains for the non-agricultural sector. Now, the importance of agricultural surplus on economic growth is nothing new. In modern growth theory its importance has been recognised since the days of the physiocrats. We asked the question how this surplus food id channelled into the non-agricultural sector. In other words, what determines the marketed surplus of food grains? In Chapter 5 we have taken a look at the literature on the marketed surplus. We have argued that in a partially monetized economy, which most of the Third World countries are, marketed surplus for food may not be positively related to price; indeed an increase in the price of food may actually reduce the available marketed surplus for food in a developing economy. Thus any attempt to create jobs in the non-agricultural sector, which pushes up the price of food through an increase in demand for it may result in a reduction in the availability of food, thereby creating inflationary pressure on the economy.