Lesson Environment and Economic Growth.pptx

Population
Growth and
Economic
Development:
Causes, Consequences, and
Controversies

6.1 The Basic Issue: Population Growth and the
Quality of Life
6.2 Population Growth: Past, Present, and Future
6.3 The Demographic Transition
6.4 The Causes of High Fertility in Developing
Countries: The Malthusian and Household Models
6.5 The Consequences of High Fertility: Some
Conflicting Perspectives
6.6 Some Policy Approaches
Overview

6.1 The Basic Issue: Population Growth and
the Quality of Life
• Population grew by 7.2 billion people at 2013. Projected to
grow 8.1 billion by 2025, and 9.6 billion by 2050.
• Every year, more than 75 million people are being added to
the world’s population.
• Mostly common in Developing Country.
• Impact on Human Welfare: This isn't just about statistics;
it's about people's well-being.

• Development Goals at Risk:
⚬ Improved incomes, health, and education.
⚬ Enhanced capabilities, self-esteem, and dignity.
⚬ Freedom of choice.
• Underlying Connections:
⚬ The link between poverty and larger family sizes.
⚬ What drives high population growth in low-income
countries.
⚬ Why population growth tends to slow down as countries
develop.

• Focus of the Chapter:
⚬ Historical and current population trends.
⚬ Basic population concepts.
⚬ Economic models explaining rapid population growth in
developing countries.
⚬ Debates about the significance of population growth.
⚬ Policy options for developing countries and how
industrialized nations can help.

• Big Questions:
⚬ What are the economic and social impacts of this growth on
development?
⚬ Is this growth inevitable, or can development efforts change it?
⚬ Is rapid population growth the main problem, or is it a symptom
of deeper issues like underdevelopment and unequal resource
distribution?
• Key Question: How does the current population situation in
developing countries help or hurt their chances of achieving
development for present and future generations?

6.2 Population Growth:
Past, Present, and Future

• 12,000 years ago: ~5 million
people.
• 2,000 years ago: ~250 million
people.
• Industrial Revolution (1750): 728
million people.
• 200 years (1750-1950): 1.7 billion
were added.
• 4 decades (1950-1990): 5.3 billion
people
• 2000s: Exceeded 6 billion
6.2 Population Growth: Past, Present,
and Future

• 1650 : Annual growth ~0.002%
• 1750 : Increased to 0.3%
• I950 : ~1.0%
• 1970 peak: ~2.3%
• Present: ~1.2% globally, 2.3%
in Africa
6.2 Population Growth: Past, Present,
and Future

• Decline in mortality (death rates)
• Medical Advancements
• Better Sanitationand Food
• Especially strong in developing countries
Why did population grow so fast?

• 75% lived in developing nations
• Less than 25% in developed nations
• By 2050: 8+ billion in developing
countries
Uneven Global Population Distribution

• India > Europe (population-
wise)
• Mexico > Canada (visually
scaled)
• Indonesia > Australia
• Bangladesh > Germany +
France combined
World Map Perspective

Rate of population increase. The growth rate of a population, calculated as the natural
increase after adjusting for immigration and emigration. Natural increase. The difference
between the birth rate and the death rate of a given population. Net international
migration. The excess of persons migrating into a country over those who emigrate from that
country. Crude birth rate. The number of children born alive each year per 1,000 population
(often shortened to birth rate). Death rate. The number of deaths each year per 1,000
population. Total fertility rate (TFR). The number of children that would be born to a woman
if she were to live to the end of her childbearing years and bear children in accordance with
the prevailing age-specific fertility rates. Life expectancy at birth. The number of years a
newborn child would live if subjected to the mortality risks prevailing for the population at the
time of the child's birth. Under-5 mortality rate. Deaths among children between birth and 5
years of age per 1,000 live births.
Population Growth and Economic Development

Total Fertility Rate (2012):
• Niger: 7.1
• Afghanistan: 6.2
• South Korea: ~1.3
• Sub-Saharan Africa: 5.1
Feltirity Rate

• 1950: Developing countries’ life expectancy is
35-40 years
• 2009: Sub-Saharan Africa is 51 years
• High-income countries ~78 years
• Big drops in child mortality
Mortality & Life Expectancy Trends

• Low Income: 40% under age 15
• High Income: 17% under age 15, 19% over 65
• Youth dependency high in developing countries
• Old-age dependency high in developed
countries
Age Structure & Dependency

• Even after birth rates drop, population keeps growing.
• Caused by large youth population.
• Takes decades to stabilize.
Hidden Momentum of Population Growth
The phenomenon whereby population continues to increase even after
a fall in birth rates because the large existing youthful population
expands the population’s base of potential parents.

• Developing countries: wide
base = many children
• Developed countries:
narrow base, wider middle
• Ethiopia = fast future
growth, Japan = aging
society
Population Pyramid

• Demographic dividend: more workers than
dependents = economic opportunity.
• Aging crisis: fewer workers, more elderly =
financial burden.
• Developed nations need immigration and higher
savings.
Demographic Dividend vs. Aging Crisis

• Population growth is not just about birth rates,
it’s about history, health, and structure.
• Major future growth is in developing regions.
• Addressing youth dependency and aging will
define global economic and social challenges.
CONCLUSION

• Population growth refers to the increase in the number of
people in a region or the world over time. This growth has
varied throughout history depending on mortality (death)
rates, fertility (birth) rates, public health, economic
development, and social changes.
• The Demographic Transition is the historical process by
which a country transitions from high birth and death rates
to low birth and death rates as a result of economic
development, modernization, and improvements in health,
sanitation, and education.
The Demographic Transition in Western Europe

• The Demographic Transition attempts to explain why all
contemporary developed nations have more or less passed
through the same three stages of modern population history.
Stage 1: High Stationary Stage (Pre-Industrial)
• Birth Rates - Very high (35 per 1,000 people).
• Death Rates - Very high - (30 per 1,000
people).
• Population Growth - Very slow or stagnant.
• Life Expectancy - Below 40 years.

Stage 2: Early Expanding Stage (Industrializing)
• Death Rates Decline Rapidly due to:
⚬ Improved public health (vaccines,
sanitation).
⚬ Advances in medical care.
⚬ Better food supply.
• Birth Rates Remain High, leading to:
⚬ Rapid population growth
Stage 3: Late Expanding Stage (Mature Industrial)
• Birth Rates Begin to Decline due to:
⚬ Urbanization.
⚬ Higher education (especially for women).
⚬ Access to family planning and contraception.
⚬ Lower child mortality = fewer children needed.
• Death Rates Remain Low.
• Population Growth Slows.

Summary of Figure 6.5: Demographic Transition in Western Europe
Figure 6.5 outlines the three stages of the demographic transition in western Europe.
In Stage 1 (Pre-19th century), both birth and death rates were high—birth rates were about 35 per 1,000 and death
rates around 30 per 1,000—resulting in slow population growth (less than 0.5% per year).
In Stage 2 (Industrializing), starting in the early 1800s, death rates began to decline due to improvements in the
economy, public health, and medical technology. However, birth rates remained high for many decades, leading to a
temporary increase in population growth.
The decline in birth rates (Stage 3) began later in the 19th century, mostly due to social changes such as later
marriages and changing family size preferences. By the late 20th century, the transition was complete: birth rates
had fallen, sometimes fluctuating, and death rates stabilized or slightly increased due to aging populations.
Despite these fluctuations, growth rates seldom exceeded 1%, and Europe's demographic patterns became more stable,
with continued research into the causes of these shifts.
Introduction to Population Growth and Transition

• This process implies movement from a relatively high number of
births per woman to a population replacement fertility level
that can be calculated to reach about 2.05 to 2.1 births per
woman when nearly all women survive to the mean age of
childbearing, as they do in developed countries.
• In developing countries with much lower survival rates,
replacement fertility can be well over 3 births per woman
Replacement Fertility Level
Introduction to Population Growth and Transition

The Demographic Transitions in Developing Country
Figure 6.6 illustrates how the demographic transition in modern
developing countries contrasts sharply with the historical
experience of western Europe. In Europe, the transition from
high to low birth and death rates occurred slowly over
centuries, largely due to gradual internal developments like
industrialization, urbanization, and improvements in
education and public health.
By contrast, many developing countries entered the transition with
higher initial birth rates and experienced much more rapid
declines in death rates, largely due to the women tend to marry
at an earlier age. As a result, there are both more families for a
given population size and more years in which to have children.

In Stage 1, like pre-industrial Europe, developing countries
experienced high birth and high death rates, resulting in slow
and often stagnant population growth.
However, a major difference is that birth rates in developing
countries were typically even higher than those in early
Europe due to cultural, economic, and social factors. This
stage reflects a demographic balance where population
growth is minimal because the number of births is closely
matched by deaths. Yet in the context of developing
countries, high fertility was more pronounced and driven
by deeply rooted traditional norms and survival
strategies.
Although Stage 1 has technically ended in most developing
countries due to improvements in health and medicine, these
initial conditions deeply influenced the explosive population
growth that followed when death rates began to fall in Stage
2.
During the 1950s and 1960s, most developing countries
entered Stage 2 of the demographic transition. This
stage marked a dramatic shift—death rates dropped
rapidly, while birth rates remained high, resulting in a
sharp acceleration of population growth.
Unlike the gradual internal improvements seen in 19th-
century Europe, these changes in developing countries
were largely driven by external technological and
medical interventions.
This rapid and externally fueled decline in mortality,
paired with persistently high fertility, led to a population
explosion in much of the developing world, setting the
stage for the diverging paths observed in Stage 3.

As developing countries moved beyond Stage 2, they began
to experience changes in fertility. However, not all countries
progressed at the same pace. Figure 6.6 divides this into two
distinct patterns based on how successfully countries have
reduced birth rates and slowed population growth. These are
labeled as Case A (successful transition) and Case B
(incomplete or stalled transition).
Case A – Countries Successfully Transitioned to Stage 3
Some developing countries have successfully transitioned into
Stage 3, where both birth and death rates are low and
population growth has significantly slowed. This group
includes countries such as Taiwan, South Korea, Costa Rica,
Chile, China, Sri Lanka, and Cuba. These nations followed a
trajectory that closely mirrors the later stages of Europe’s
demographic transition, although at a much faster pace.
Case B – Countries Stalled in Stage 2
In contrast, many countries—especially in sub-Saharan Africa,
parts of the Middle East, and South Asia—have not made the
full transition. While they experienced some early decline in
mortality during Stage 2, progress slowed or stagnated, and
fertility rates remain high. These countries are still largely
trapped in Stage 2, struggling to lower birth rates due to
persistent poverty, inequality, and weak health systems.
The important question, therefore, is this:
When and under what conditions are developing nations
likely to experience falling birth rates and a slower
expansion of population?

To answer this question, we need to ask a prior
one. What are the principal determinants or
causes of high fertility rates in developing
countries, and can these determinants of the
“demand” for children be influenced by
government policy? To try to answer this
critical question, we turn to a very old and
famous classical macroeconomic and
demographic model, the Malthusian
“population trap,” and a contemporary and
highly influential neoclassical
microeconomic model, the household theory
of fertility.
Figure 6.6 illustrates the contrasting demographic transitions in
developing countries. While death rates declined rapidly in the
mid-20th century due to imported medical technologies, high
birth rates—often higher than those in preindustrial Europe—
resulted in rapid population growth during Stage 2.
As countries moved toward Stage 3, two patterns emerged. Case
A countries successfully reduced fertility through investments
in education, family planning, and urbanization. In contrast, Case
B countries remain in Stage 2 due to persistent poverty, low
female education, and limited access to healthcare and
contraception.
This divergence highlights a critical global issue: ensuring that
more developing nations can complete the demographic
transition by improving living standards and enabling fertility
decline, ultimately supporting sustainable development.
Conclusion:

6.4 THE CAUSES OF HIGH FERTILITY
IN DEVELOPING COUNTRIES:
THE MALTHUSIAN AND HOUSEHOLD
MODELS

• More than two centuries ago, Thomas Malthus proposed a theory linking
population growth and economic development. He posited that population
grows geometrically, doubling every 30-40 years, while food supplies grow
arithmetically due to diminishing returns on land. This imbalance would lead to
per capita incomes falling to subsistence levels, creating a "low-level
equilibrium population trap." or, more simply, the “MALTHUSIAN
POPULATION TRAP”.
THE MALTHUSIAN POPULATION TRAP
• Malthus argued that "moral restraint" was the only way to avoid chronic
poverty. This indirectly positioned him as a pioneer of the modern birth control
movement. The model highlights a universal tendency for population to
outpace food, leading to a struggle for survival at subsistence levels.

• Figure 6.7 shows the Malthusian model by comparing how population and income growth
change with different levels of per capita income. The vertical axis measures the percentage
growth rates of both population and total income. The horizontal axis represents per capita
income levels. The gap between the income growth curve and the population growth curve
indicates the growth in per capita income.
• When income is very low (below $250 per year),
population growth stays minimal due to poor
nutrition and high death rates. As income rises,
population growth speeds up, eventually reaching
a peak. After this peak, growth slows down and
moves toward stability, following the demographic
transition. Higher income also boosts savings and
investment, leading to greater overall economic
growth.

• Modern-day neo-Malthusians argue that poor
nations can only escape the subsistence trap by
implementing "preventive checks" like birth
control. Without these, "positive checks" such as
starvation, disease, and wars would inevitably
control population growth. However, the model
also suggests a potential escape if per capita
income can reach a "threshold level," labeled T in
Figure 6.7.
• The curves intersect at point S, representing a
stable equilibrium where per capita income is
at a subsistence level. If income slightly
exceeds S, population grows faster than
income, causing per capita income to fall
back to S. Conversely, if income is slightly
below S, income grows faster than
population, leading to a rise back to S. This
low-level equilibrium was characteristic of
most human history before the modern era.

• Beyond point T, population growth is
consistently lower than total income
growth, allowing per capita income
to grow continuously. This sustained
growth can also be achieved through
technological progress, which shifts
the income growth curve upward, or
through changes in economic
institutions and culture ("social
progress") that shift the population
growth curve downward. These
shifts can eliminate the population
trap equilibrium, enabling self-
sustaining economic growth.

• The Malthusian population trap theorizes a direct relationship between population growth and economic
development. However, this model is based on simplistic assumptions that do not hold up to empirical
verification in the modern era.
We can criticize the population trap on two major grounds.
1. Its failure to account for the profound impact of technological progress.
2. It focuses on its assumption that national population growth rates are directly and positively
correlated with national per capita income levels.
CRITICISMS OF THE MALTHUSIAN MODEL
WHY DO WE STILL STUDY THE MALTHUSIAN TRAP DESPITES ITS
LIMITATIONS
• Despite its empirical limitations in the modern context, the Malthusian and neo-Malthusian theories
are still studied for several reasons;
• FIRST, Continued Relevance of the Model for Poor Countries
• SECOND, Historical Evidence of Population Traps
• LASTLY, Modern Factors Preventing Population Traps

Economists are increasingly using microeconomic
theory to explain falling birth rates, particularly in
stage 3 of the demographic transition. This approach
applies traditional neoclassical consumer behavior
theory to family size decisions, viewing children as a
special type of consumption good.
The Microeconomics Household Theory
of Fertility
Understanding Fertility Through Economic
Principles

The conventional theory of consumer behavior
• assumes that an individual with a given set of tastes or
preferences for a range of goods (a “utility function”) tries to
maximize the satisfaction derived from consuming these
goods subject to his or her own income constraint and the
relative prices of all goods.
Key Determinants of Child Demand
The demand for surviving children (Cd) is a function of household
income (Y), the net price of children (Pc), prices of other goods (Px),
and tastes for goods relative to children (tx). These relationships are
expressed mathematically:
Cd=f(Y,Pc,Px,tx), x = 1, ..., n

• ∂Cd/ Y > 0: Higher household income leads to greater
∂
demand for children.
• ∂Cd/ Pc < 0: Higher net price of children leads to lower
∂
quantity demanded.
• ∂Cd/ Px > 0: Higher prices of other goods relative to
∂
children increase child demand.
• ∂Cd/ tx < 0: Stronger tastes for other goods relative to
∂
children reduce child demand.
Expected Relationships in Fertility Demand
Under standard neoclassical conditions,
we expect the following relationships:

The budget constraint line (ab) in Figure 6.9 shows the household's financial ability to acquire
combinations of goods and children. All points within the triangular area 0ab are attainable.
The optimal combination, maximizing family satisfaction, is at point f, where the budget constraint ab
is tangent to indifference curve I2. This results in C3 children and G2 goods demanded.
The Budget Constraint and Optimal
Choice
• Figure 6.9 simplifies the microeconomic theory
of fertility. The horizontal axis measures desired
children (Cd), and the vertical axis measures
total goods consumed by parents (Gp).
Indifference curves represent satisfaction levels,
while the budget constraint line (ab) shows
attainable combinations.

Impact of Child Price and Combined Factors
An increase in the price (opportunity cost) of children relative to other
goods causes households to substitute commodities for children, moving
the equilibrium from f to e on a lower indifference curve.
A simultaneous increase in household income and net
child price (e.g., from female employment and child
taxes) shifts the budget constraint to cd. This results in
fewer children per family (point g compared to f), while
still improving welfare.
Increased Income
• leads to higher demands for both commoditiecs and children,
assuming children are normal goods.
Child Quality Over Quantity
• Parents may opt for fewer, higher quality children (e.g., better
educated) as income rises.
Impact of Income on Fertility

Recent research has refined the traditional economic theory of fertility by
recognizing that households in developing countries often do not act in a
"unitary" manner. Instead, men and women may have differing objectives,
such as husbands desiring more children than wives.
• Household decisions are now seen as a result of bargaining between
spouses.
• This reflects the growing bargaining power of women within
families.
• The non-unitary (bargaining-based) model explains inefficient
household behaviors, such as disproportionate investment in
husbands’ farm plots.
The Demand for Children in Developing
Countries

Empirical Insights: Education, Mortality, and Fertility
• Statistical studies in developing countries support the economic theory of
fertility.
• Higher female employment opportunities outside the home lead to lower
fertility rates.
• Increased school attendance—especially at primary and secondary levels—
also correlates with reduced fertility.
• Educated women tend to earn more and have fewer children.
• Studies show a strong link between lower child mortality and reduced fertility.
• Higher female education and income help reduce child mortality.

The impact of social and economic progress on lowering fertility in
developing countries is most significant when benefits are shared by
the majority, especially the very poor. Birth rates among the
impoverished are likely to fall with specific socioeconomic changes.
These changes include improved
• education and status for women,
• increased non-agricultural wage employment for women
• rise in family income through direct employment or income
redistribution.
Socioeconomic Progress and Fertility
Decline

1.Enhanced Education and Status for Women
• Improving women's education and their societal role.
1.Increased Female Non-Agricultural Employment
• Raising the opportunity cost of traditional child-rearing
activities.
1.Rise in Family Income Levels
• Through increased employment and earnings or income
redistribution.
1.Reduced Infant Mortality
• Via expanded public health and improved nutrition and
medical care.
1.Development of Old-Age Social Security Systems
• Lessening economic dependence on offspring.
1.Expanded Schooling Opportunities
• Enabling parents to substitute child "quality" for quantity.
Key
Drivers
for
Reduced
Fertility
Rates

• Expanding jobs, education, and healthcare—especially for
poor communities and women—boosts well-being.
• Improved opportunities often motivate smaller families, helping
reduce population growth.
• Family-planning programs become more effective when this
motivation exists.
• These programs support parents in planning and managing
family size.
• There's agreement on the causes of population growth, but
debate over its consequences remains.
The Role of Family Planning Programs

6.5 THE CONSEQUENCES OF HIGH
FERTILITY: SOME CONFLICTING
PERSPECTIVES

IT'S NOT A REAL PROBLEM
We can identify three general lines of argument on the part of people who
assert that population growth is not a cause for concern:
• The problem is not population growth but other issues.
• Population growth is a false issue deliberately created by
dominant rich-country agencies and institutions to keep
developing countries in their dependent condition.
• For many developing countries and regions, population growth
is in fact desirable.

1.Underdevelopment
Other Issues
• Development should be the only goal. If correct strategies are
pursued and lead to higher levels of living, greater self-esteem,
and expanded freedom, population will take care of itself.
• Without education, healthcare, and financial security, many
families in poor countries rely on having more children for
survival—because they don’t feel free to choose smaller families.

2. World Resource Depletion and Environmental
Destruction
Other Issues
• Population can only be an economic problem in relation to the
availability and utilization of scarce natural and material resources.
• Developed nations should reduce their excessive consumption
instead of asking poorer countries to limit population growth.
• Developed countries consume almost 80% of the world's resources.
• Overconsumption of developed countries = poor living conditions =
high fertility

3. Population Distribution
Other Issues
• Many regions of the world (e.g., parts of sub-Saharan Africa) and
many regions within countries (e.g., the northeastern and Amazon
regions of Brazil) are viewed as underpopulated in terms of
available or potential resources.
• Governments should therefore strive not to moderate the rate of
population growth but rather to bring about a more natural
spatial distribution of the population in terms of available land
and other productive resources.

4. Subordination of Women
Other Issues
• According to this argument, population growth is a natural
outcome of women’s lack of economic opportunity.
• If women’s health, education, and economic well-being are
improved along with their role and status in both the family and
the community, this empowerment of women will inevitably lead
to smaller families and lower population growth.

IT’S A DELIBERATELY CONTRIVED FALSE
ISSUE
• closely allied to the neocolonial dependence theory of underdevelopment.
• the overconcern in the rich nations with the population growth of poor
nations is really an attempt by the former to hold down the
development of the poor in order to maintain an international status
quo that is favorable to the rich nations’ self-interests.

• views population control efforts by rich countries as racist or genocidal
attempts to reduce the relative or absolute size of the poor, largely
nonwhite populations of the world who may someday pose a serious
threat to the welfare of the rich, predominantly white societies.
Radical neo-Marxist version
• Worldwide birth control campaigns are seen as manifestations of the
fears of the developed world in the face of a possible radical challenge
to the international order by the people who are its first victims.

IT’S A DESIRABLE PHENOMENON
• population growth as an essential ingredient to stimulate economic
development.
• Larger populations provide the needed consumer demand to generate
favorable economies of scale in production, to lower production costs,
and to provide a sufficient and low-cost labor supply to achieve higher
output levels.

• free markets will always adjust to any scarcities created by population
pressures.
Neoclassical “Revisionist” View on Population Growth
• Such scarcities will drive up prices and signal the need for new cost-saving
production technologies.
• In the end, free markets and human ingenuity will solve any and all
problems arising from population growth.
Julian Simon - human ingenuity/creativity is the “ultimate resource.”

• Underpopulation—not overpopulation—is the problem in many rural
areas of developing countries.
Neo-Marxist Pronatalist View
• scholars argue that much arable land is uncultivated because there aren’t
enough people to work it.
Especially applies to parts of:
• Tropical Africa - 1.4 billion hectares are potentially arable land but
only 12% is currently under cultivation
• Latin America
• Asia

1.) National Security / Border Protection - a need for more population in sparsely
populated border areas. To defend against potential threats or expansionist
intentions of neighboring nations.
Non-Economic Arguments Supporting Population
Growth
2.) Cultural, Ethnic, and Religious Preservation - Large family norms are deeply
rooted in the traditions of many ethnic, racial, or religious groups. Protecting the
right to large families is seen as a moral and political issue.
3.) Military and Political Power - A large and youthful population is often equated
with national power.
• More young people = greater military recruitment potential and political
influence on the global stage.

The Extremist Argument: Population
and Global Crisis
• The population-as-problem argues that excessive population growth is the
main cause of economic and social issues, including poverty, malnutrition, and
environmental degradation. It uses terms like population bomb and explosion,
and predicts food and ecological disasters. Advocates argue that population
stabilization or decline is the most urgent task, even in densely populated
developing countries like India and Bangladesh.

The Theoretical Argument: Population-Poverty Cycles and the
Need for Family-Planning Programs
• The Population-Poverty Cycle Theory suggests that rapid population growth leads to
negative economic consequences, especially in developing countries. This theory
exacerbates underdevelopment issues, reducing savings rates and government revenues,
and transmitting poverty to future generations. Economic and social development are
necessary to slow population growth and reduce fertility and mortality. However, family-
planning programs are also needed to prevent unwanted pregnancies. Countries like
France, Japan, the US, Great Britain, Taiwan, and South Korea have successfully reduced
population growth without family-planning services.

A Simple Model: Simplification of the Standard Solow-Type
Neoclassical Growth Equation.
Y = f(K,L,R,T)
Using the standard production function, that is, output is a function of capital, labor,
resources, and technology holding the resource base fixed, we can derive the result
to
y - l = a(k - l) + t
where
y = rate of GNI (Gross National Income) growth
l = rate of labor force (population) growth
k = rate of growth of the capital stock
a = capital elasticity of output (usually found to be constant)
t = the effect of technological change

• Economic Growth
• Poverty and Inequality
• Education
• Health
• Food
• Environment
• International Migration
Other Empirical Arguments: Seven Negative
Consequences of Population Growth

3 Goals and Objectives: Toward a Consensus
The following three propositions constitute the essential components of
this intermediate or consensus opinion.
2. Population issues are not just about numbers; they also impact quality of
life and material well-being. Developing countries' population size should be
considered alongside developed-country affluence in terms of resource
quantity, distribution, and utilization.
1. Population growth is not the primary cause of low levels of living, nor
extreme inequalities, and limited freedom of choice that characterize much of
the developing world. The root causes are poor families, particularly women,
and failures in domestic and international development policies.

3 Goals and Objectives: Toward a Consensus
The following three propositions constitute the essential components of
this intermediate or consensus opinion.
3. Rapid population growth increases underdevelopment problems and distances
development prospects. The momentum of growth means that developing countries'
populations will increase dramatically over the coming decades, regardless of fertility
control measures. It follows high population growth rates, though not the principal
cause of underdevelopment, are nevertheless important contributing factors in specific
countries and regions of the world.

1. Address Underlying Social & Economic Problems
3 POLICY GOALS AND OBJECTIVES
• other primary objective of any strategy to limit further growth
must deal not only with the population variable per se but also
with the underlying social and economic conditions of
underdevelopment.
Policy focus should be on:
• reducing poverty and inequality
• creating jobs (especially for women)
• improving access to education, health, and nutrition

2. Provide Voluntary Family Planning Services
• family-planning programs providing both the education and the
technological means to regulate fertility for people who wish to
regulate it should be established.
Set up programs that combine:
• Education on reproductive health
• Access to safe, affordable fertility-control options

3. Global Support with Shared Responsibility
Developed countries should help developing countries achieve their
lowered fertility and mortality objectives, not only by providing
contraceptives and funding family-planning clinics, but also, by:
• Reducing excessive consumption of global resources
• Truly committing to end poverty, illiteracy, disease, and hunger—
both in developing nations and within their own borders.
• By recognizing in both speech and policy that sustainable
development—not population control—is the core challenge.

6.6 Some Policy Approaches
In view of these broad goals and objectives, what kinds of economic and social
policies might developing and developed-country governments and international
assistance agencies consider to bring about long-term reductions in the overall
rate of world population growth? Three areas of policy can have important direct
and indirect influences on the well-being of present and future world populations:
1. General and specific policies that developing country
governments can initiate to influence and perhaps even control
their population growth and distribution

2. General and specific policies that developed-country governments
can initiate in their own countries to lessen their disproportionate
consumption of limited world resources and promote a more
equitable distribution of the benefits of global economic progress
3. General and specific policies that developed-country governments
and international assistance agencies can initiate to help developing
countries achieve their population objectives

What Developing
Countries Can Do

Development Policies for Population Transition
• Eliminate absolute poverty
• Lessen income inequalities
• Expand educational opportunities (especially for women)
• Increase job opportunities
• Provide preventive medicine, clean water, and sanitation
• Improve maternal and child health through better nutrition
• Provide equitable social services

Root Cause of Population Problem
• Not numbers or irrationality, but poverty and low
living standards
• Negative social externalities justify government
intervention
• Long-run development policies are essential

Short-Term
Policies in
Developing
Countries

Five Specific Policies to Reduce Birth Rates
1. Persuade people to have smaller families via media and education
2. Enhance family-planning programs (health + contraception)
3. Manipulate economic incentives/disincentives (e.g., maternity leave, taxes,
subsidies)
4. Coerce people into having smaller families through the power of state
legislation and penalties (rare, often rejected)
5. Raise the social and economic status of women to delay marriage and reduce
fertility

Country Examples of Population Policies
Singapore: Limited maternity leave, scaled delivery fees, tax relief
caps, school admission bias
China: Most comprehensive state-enforced incentives/disincentives
India (1977): Forced sterilization backlash led to political defeat

Women’s Status and Fertility
• Educated women delay marriage and control childbearing
• Employment increases income, decision-making, and
independence
• Reduces early marriage and frequent childbirth
• Cairo Conference (1994): Emphasis on empowerment and
autonomy

Reproductive
Choice
The concept that women should be able to
determine on an equal status with their
husbands and for themselves how many
children they want and what methods to use to
achieve their desired family size.

Overconsumption & Environmental Impact
• 4.5% of world (U.S.) uses nearly 20% of world energy
• Problem: Affluence, not just population size
• Resource depletion due to lifestyles, not just numbers

Solutions in Rich Nations
• Simplify consumption and lifestyles
• Free resources for poor nations
• Liberalize immigration for unskilled workers
• UN: Barriers to migration cost developing nations
$250B/year

How Developed
Countries Can Help
Developing Countries
with Their Population
Programs

What the
Developed
Countries Can Do

Supporting Population Programs in Developing Countries
• Expand development aid and fair trade
• Technology transfer and local research
• Equitable resource sharing
• Improve commodity-pricing policies

Two Direct Areas of Support
Specific International Assistance
1. Fertility control research – Pills, IUDs, sterilization,
AIDS-safe contraception
2. Financial aid – Family planning, public education,
population policy research

Limits of External Support
Caution on Premature Family Planning
• Sophisticated planning useless without motivation
• Reducing poverty is more effective than just
planning access

Conclusion
• Fertility rates declining (e.g., Bangladesh, sub-
Saharan Africa)
• Lowered global population projections
• Family planning + poverty reduction = long-term
success

Urbanization and
Rural-Urban
Migration:
Theory and Policy

7.1 Urbanization: Trends and Living Conditions
7.2 The Role of Cities
7.3 The Urban Giantism Problem
7.4 The Urban Informal Sector
7.5 Migration and Development
7.6 Toward an Economic Theory of Rural-Urban
Migration
7.7 Conclusion: A Comprehensive Urbanization,
Migration, and Employment Strategy
Overview

7.1 URBANIZATION:
TRENDS AND
LIVING
CONDITIONS

• The world became majority urban in 2009, with the developing world
expected to follow before 2020.
• Least developed countries are expected to urbanize after 2050.
• Asia and Africa account for 86% of global urban population growth between
2012 and 2050
• Africa’s urban population: from 414 million (2012) 1.2 billion
→
(2050).
• Asia’s urban population: from 1.9 billion 3.3 billion.
→
• Rural population in Asia is expected to decline due to heavy urban migration
in this period.
• Higher per capita income is generally linked to higher urbanization.
• Countries like Japan are both high-income and highly urbanized.
• Poor countries like Burundi remain less urbanized.

• Urbanization continues even in countries with low or negative income
growth.
• Urbanization is not only driven by income; policies and other factors
matter.
• Countries with similar incomes can have different urbanization rates.
• FROM: 1950: 275M urban dwellers in developing world.
• TO: 2010: Over 3.4B urban dwellers.
• While individual countries become more urbanized as they develop, today’s
poorest countries are far more urbanized than today’s developed countries
were when they were at a comparable level of development, as measured by
income per capita.

URBANIZATION WITHOUT INDUSTRIALIZATION
• In Africa, urban growth is not tied to industrialization.
• Larger cities (5M+) grow faster than smaller ones in developing
countries.
• MEGACITIES GROWTH:
• 1970: Only 2 megacities worldwide.
• 1990: 10 megacities.
• 2011: 23 megacities — 18 in developing countries.
• 2025 projection: 30 of 37 megacities will be in developing countrie
(over 80%).
• Urban growth is happening at lower income levels than in developed
countries.

1. Urban Growth Patterns
• Urbanization has rapidly
accelerated in developing
countries, especially in
small and medium cities,
though megacities have
seen a 16-fold increase
from 39 million to 630
million 1970 to 2025.
Urbanization: Trends and Living Conditions
(1970–2050)

• Megacities (10+ million
people) now host more
residents than medium-
sized cities (5–10 million).
• Urban growth is fueled by
rural-urban migration
and increasing
urbanization rates in the
developing world.
1. Urban Growth Patterns

2. Opportunities and Challenges of Megacities
• Advantages: Economies of scale, agglomeration benefits, access to labor,
transport, and social amenities.
• Challenges: Overcrowding, crime, pollution, high congestion costs, and the
mismatch with labor-rich, capital-poor economies.
Urban Slums and Policy Challenges
MDGs and Slum Reduction
• Millennium Development Goals (MDG) Target 11 aimed to improve
lives of 100 million slum dwellers by 2020.
• Goal was likely met, but this only addressed ~10% of slum dwellers as
of 2013.
• Slum population may reach 3 billion by 2050 if trends continue.

Root Causes of Slum Growth
• Driven by population growth and rural-urban migration.
Governments partly to blame due to:
• Misguided urban planning
• Outdated building codes (e.g., Nairobi’s colonial-era laws made housing
unaffordable)
• Legal restrictions on slum upgrades
Ineffective Government Approaches
• Many policies aim to discourage migration rather than manage it.
• In cities like Manila, most people can't afford legal housing.
• Some believe governments intentionally worsen migrant conditions
to deter further migration.

Policy Imperatives and Future Outlook
Urban-Rural Imbalance
• Need for balanced development policies to shape urban growth.
• With declining birth rates, urbanization and migration will remain
key development issues.
• Informal sector will play a growing role in labor absorption and
economic growth.
• About 35–60% of urban growth comes from rural migrants.
• Three-quarters of developing countries report trying to slow or
reverse migration trends.
• Focus on urban industrial growth has created economic imbalances
between rural and urban areas.

Agglomeration Economies
Cities are formed because they provide cost advantages to producers and
consumers.
• Cost advantages to producers and consumers from location in cities and
towns.
• a concept or term used to describe the advantages of geographic
concentration.

Urbanization Economies
2 FORMS OF
AGGLOMERATION
ECONOMIES
(Walter Isard)
• Agglomeration effects associated with the
general growth of a concentrated
geographic region.
• the general benefits everyone enjoys just
from being in a big, growing city or urban
region—no matter what kind of business
or job they have.

Localization Economies
2 FORMS OF
AGGLOMERATION
ECONOMIES
(Walter Isard)
• Agglomeration effects captured by
particular sectors of the economy, such
as finance or autos, as they grow within an
area.
• happen when businesses in the same
industry cluster together.
• often take the form of backward and
forward linkages

ASPECT URBANIZATIO
N
LOCALIZATIO
N
Main Idea • benefits from the size and
diversity of the city/region
• benefits from industry-
specific clustering in one
area
Who
benefits?
• all businesses and
individuals across various
industries
• businesses in the same
industry
Economic
Impact
• promotes overall
city/regional development
• boosts productivity and
innovation within a specific
field

INDUSTRIAL DISTRICT (ALFRED MARSHALL)
• A concentrated area where related businesses group together to benefit
from shared resources, infrastructure, and skilled labor.
• Firms often prefer to be located where they can learn from other firms
doing similar work (spillovers from these are also agglomeration
economies)
Example:
Taytay, Rizal (Garments Capital of the Philippines) - Home to thousands of
small clothing manufacturers and tailors

COLLECTIVE EFFICIENCY (KHALID NADVI)
Passive Collective Efficiency
• Firms benefit just by being part of the cluster—even if they don’t coordinate.
Active Collective Efficiency
• other benefits must be achieved through collective action, such as developing
training facilities or lobbying government for needed infrastructure as an
industry rather than as individual firms

WIDESPREAD EMERGENCE OF
CLUSTERS
Cluster (Michael Porter)
• Industrial clusters are increasingly found
in developing countries, across various
stages of development—from cottage
industries to advanced manufacturing.
• refers to a concentration of businesses or industries in the same area that
benefit from being near each other.
• These clusters can strengthen industrial
competitiveness, but their dynamism and
performance vary widely.
BENEFITS OF CLUSTERING
• Shared specialization among producers
attracts intermediaries and makes
marketing easier.
• Clusters can create more specialized
employment
Example: Ethiopian hand-loom weavers
who share workspaces, divide tasks more
efficiently, and have access credit
(support).

CLUSTER DEVELOPMENT STAGES
(DOROTHY MCCORMICK)
1. Groundwork Clusters - Early-stage clusters made up of small, informal
producers with basic tools and minimal specialization.
2. Industrializing Clusters - Clusters that begin to adopt specialization,
technology, and more structured organization.
3. Complex Industrial Clusters -Mature, competitive clusters producing at high
productivity levels, often serving national or global markets.

EFFICIENT URBAN SCALE
Localization Economies Have Limits
Localization economies benefit closely related industries (those with strong
backward and forward linkages), but:
Exception: Sometimes, technological spillovers from one industry can benefit
another (e.g., tech adapted for healthcare).
• It’s not efficient to concentrate all industries in one city.
• Unrelated industries don’t gain much from clustering together.

The “Black Hole” Effect
• If transportation costs for finished goods are high, firms and consumers may
concentrate in one mega-city to avoid them.
• But this leads to over-concentration, which is costly and inefficient.
• It’s usually cheaper to improve national transport systems than to maintain a
massive urban complex.

Centripetal vs. Centrifugal Forces
• Centripetal forces: Pull industries and people into cities (e.g.,
agglomeration economies).
• Centrifugal forces: Push them out due to diseconomies of scale (e.g.,
rising costs, congestion).

1. Urban Hierarchy Model (Central Place Theory)
2 THEORIES OF CITY SIZE
• Developed by August Lösch and Walter Christaller
Explains city size based on:
> Economies of scale in production
> Transportation costs
> Land Demand and Real Estate Prices

Each industry has a market radius—the area it can serve efficiently
⚬ Larger economies of scale + lower transport costs larger
→
market radius
⚬ High real estate prices smaller radii
→
1. Urban Hierarchy Model (Central Place Theory)
As a result:
⚬ Small cities host industries with short market radii
⚬ Large cities host both short- and long-radius activities

• Developed by Alfred Weber, Walter Isard, and Leon Moses
2. Differentiated Plane Model
• the limited number of transportation routes linking the industries
within an economy plays a key role.
• Urban centers form at “internal nodes”—where limited transport routes
intersect
• The hierarchy of urban sizes depends on the pattern of nodes and the
industrial mix.
• Primary processing industries (e.g., mining, milling) locate near raw
materials
• Industries with strong backward or forward linkages tend to cluster
together in cities

Urban Giantism Refers to a situation where
a single city—usually the
capital—grows
disproportionately larger
than all other cities in a
country, leading to
economic inefficiencies,
overpopulation, and
infrastructure overload.

Hub-and-Spoke Transportation
⚬ Outlying areas (spokes) to a central
city (hub).
⚬ Inherited from colonial powers
⚬ Promote centralization and limit
regional development
In the case of developing countries, the main transportation routes are
often a legacy of colonialism.

First-City Bias
A situation where a
country's largest city
receives a
disproportionate
amount of public
and private
investment.

Import Substitution
Industrialization (ISI)
A policy encouraging domestic
production by limiting imports.
Firms gather in capital cities to be near
government, suppliers, and consumers
when trade is restricted.
Example

Bread and Circuses Effect
by Alberto Ades and Edward Glaeser
Governments provide benefits to urban residents
(especially in capital cities) to prevent unrest.
This political strategy
increases migration to the
first city and deepens
urban biases

Coordination Problem Congestion Costs
Edge City
• Difficulty in starting development in
new cities due to lack of initial firms,
infrastructure, or people.
• Even if there are benefits to
decentralizing, no one wants to be the
first to move.
• Firms prefer staying in overcrowded
cities rather than moving to new
regions with no guarantee of success.
• Economic losses due to traffic,
overcrowding, high rent, long
commutes, and infrastructure strain.
• These increase as cities grow too
large, reducing productivity and
quality of life.
• Mexico City experiences traffic
gridlocks and pollution due to its size.
• A newly developed urban area on the outskirts of a major city.
• Helps reduce congestion in the main city by spreading out economic activity.
• Example: In the U.S., places like Arlington, Virginia, serve as edge cities outside Washington, D.C.

Urban giantism often
leads to:
• Overcrowding
• Pollution
• High living costs
• Inefficient economic
activity due to extreme
congestion
• Uneven economic
development

Main Causes of Urban Giantism:
• Colonial infrastructure (hub-and-spoke roads)
• Political decisions to favor capital cities
• Economic centralization due to ISI policies
• Weak capital markets that fail to support new cities
• Fear of political instability leading to “bread and circuses” spending
Why It Matters
• Urban giantism drains resources from the rest of the country.
• Makes cities less livable due to congestion and high costs.
• Slows down national development by neglecting secondary cities.
• Decentralized, balanced growth leads to better long-term
development.

With our better understanding of the causes of outsized primate cities, it becomes clear that this
feature is not inevitable. Indeed, if trends toward greater democracy, reduced incidence of coups,
increased outward-looking policies, and improved prospects of solving and preventing civil conflicts are
maintained, the ratios of largest to second-largest cities where urban giantism has prevailed are
likely to continue to decrease.
Solutions & Policies
• Strengthening infrastructure and services in secondary cities
• Decentralizing government and industry functions
• Improving rural opportunities to reduce migration pressure
• Encouraging democratic governance to reduce “bread and
circuses” spending

Definition
The informal sector is part of the urban economy made up
of small, unregistered businesses. These are often:
• Family-owned
• Using simple, labor-intensive tools
• Operating without formal licenses or regulations

• In the 1970s, experts noticed that urban job seekers
were not appearing in official unemployment stats.
• Instead, they worked in informal jobs such as vending,
fixing items, hawking, or offering small services.
• Some even became successful small entrepreneurs.
• This sector grew because the formal sector couldn’t
provide enough jobs.
Background

Key
Features
• Mostly self-employed or small family-run
businesses
• Easy to enter but very competitive
• Low productivity due to:
Lack of education and skills
Little access to loans or credit
• No job security, benefits, or proper
working conditions
• Often live in slums or squatter settlements

Importance
• In many developing cities, 30% to
70% of workers are in the informal
sector.
• It offers survival income when
formal jobs are scarce.
• It helps the urban poor, including
many rural migrants.

Role of Women
• Women dominate this sector in many regions, often
doing small trade, food preparation, or crafts.
• They face more poverty and lack access to:
Credit
Property rights
Childcare
• Female-headed households are usually poorer and
more vulnerable.

1. Generates jobs quickly and cheaply
2. Uses local resources and labor
3. Recycles waste and provides basic services
4. Offers training through apprenticeships
5. Helps distribute development benefits to the poor
6.Can survive even in hostile environments (no
support from government)
Benefits of the Informal Sector

Problems
and
Challenges
• Might encourage more rural-urban
migration, increasing overcrowding
• Can lead to pollution and congestion in
cities
• Workers still prefer formal jobs when
available
• Often linked to illegal activities (e.g.,
drug trade, prostitution)
• Vulnerable to climate disasters and poor
living conditions

Policies for the Urban Informal Sector
• Reduce bureaucratic red tape in business
registration
• Improve training and skills programs
• Provide microcredit and access to technology
• Designate proper workspaces and stalls
• Improve living conditions (especially in smaller
cities)
• Support women with property rights, childcare,
and access to finance

MIGRATION AND ECONOMIC
DEVELOPMENT
• Rural-urban migration is a key force in development.
• Developing countries see higher migration rates than
urban job creation.
• Urban areas struggle to absorb migrants due to limited
jobs and services.

STRUCTURAL IMBALANCES
FROM MIGRATION
• Supply side: too many job seekers, especially young,
educated migrants.
• Demand side: urban jobs are hard and expensive to
create.
• This mismatch leads to chronic urban surplus labor.

IMPORATANCE OF
UNDERSTANDING MIGRATION
• Knowing why people move helps shape better policies.
• Migration changes economic geography and population
growth.
• Every policy that affects rural or urban income influences
migration.

KEY POLICIES THAT INFLUENCE
MIGRATION
• Direct impact: wages, employment, programs.
• Indirect but crucial: land tenure, education, taxes, credit,
infrastructure.

CONCLUSION AND KEY
QUESTIONS
• Migration is deeply connected to development.
• Which policies matter most?
• How can we balance goals (e.g. reduce migration vs.
improve rural education)?

7.6 TOWARD AN ECONOMIC THEORY
OF RURAL-URBAN MIGRATION

• Western Europe and the United States' economic
development was primarily linked to labor movement
from rural to urban areas, with the rural sector dominated
by agriculture and the urban sector focusing on
industrialization. This model served as a blueprint for
structural change in developing countries. However, recent
evidence of massive rural-urban migration (despite the
rising urban unemployment and underemployment
challenges) lessens the validity of the Lewis two-sector
model of development.
• The Todaro migration model, also known as the Harris-
Todaro model, explains the paradoxical relationship
between accelerated rural-urban migration and rising
urban unemployment.

TOWARD AN ECONOMIC THEORY OF
RURAL-URBAN MIGRATION
TODARO MIGRATION MODEL
- A theory that explains rural-urban migration as an economically rational process
despite high urban unemployment. Migrants calculate (present value of) urban expected
income (or its equivalent) and move if this exceeds average rural income.
HARRIS-TODARO MODEL
- An equilibrium version of the Todaro migration model that predicts that expected
incomes will be equated across rural and urban sectors when taking into account
informal-sector activities and outright unemployment.

A VERBAL DESCRIPTION OF THE TODARO MODEL
The Todaro model suggests that migration is primarily an economic phenomenon, with
migrants choosing the one that maximizes their expected gains from migration. This
theory assumes that members of the labor force compare their expected incomes for a
given time horizon in the urban sector with prevailing average rural incomes and
migrate if the former exceeds the latter.
In deciding to migrate, the individual must balance the probabilities and risks of being
unemployed or underemployed for a considerable period of time against the positive
urban-rural real income differential. If the probability of success is 60% and the expected
urban income is 60 units, it would be entirely rational for the migrant to try his luck in
the urban area, even though urban unemployment may be extremely high.

A DIAGRAMMATIC PRESENTATION
• The diagrammatic Harris-Todaro model explains how rural-to-urban migration
in developing countries leads to persistent urban unemployment.
• This unemployment arises not because rural and urban wages are equal, but
because expected urban income equals average rural income.
• The model assumes two sectors:
⚬ Rural agriculture
⚬ Urban manufacturing
• Labor demand is represented by:
⚬ AA – downward-sloping rural labor demand curve
⚬ MM′ – urban labor demand curve (read right to left)
• The total labor force is fixed (represented by line OA & OM).
• In a traditional neoclassical model:
⚬ Wages are flexible and adjust freely between sectors.
⚬ Equilibrium occurs when rural and urban wages equalize.
⚬ All workers are fully employed across both sectors, and there is no
unemployment.

Harris-Todaro Scenario:
• Urban wages (WM) are fixed above the market-
clearing level, often due to:
⚬ Minimum wage laws
⚬ Union influence
• This wage rigidity means:
⚬ Not all urban job seekers can find formal
employment.
⚬ Only a portion of migrants (OMLM) get urban
jobs.
• The rest either:
⚬ Remain in rural employment, or
⚬ Become urban unemployed.
• Despite limited urban jobs, rural workers continue to migrate,
attracted by the possibility of higher earnings.
• Migration decisions are based on expected urban income.
Equilibrium Outcome (Point Z):
• At point Z in the diagram:
⚬ The expected urban income equals rural income, stopping
further migration.
⚬ Urban unemployment still exists.
⚬ Urban labor force consists of:
￭ OMLM workers in formal jobs (earning WM)
￭ OMLA – OMLM unemployed or in low-income informal
sector
• This creates a stable but inefficient equilibrium with:
⚬ Persistent urban unemployment
⚬ Privately rational but socially costly migration behavior
Migration Decision Based on Expected Income

• Migrants from the same rural areas often settle in the same distant cities or neighborhoods. This pattern is
explained by a model from Carrington, Detragiache, and Vishwanath, which suggests that earlier migrants
create positive externalities for later ones by easing resettlement, lowering migration costs, and reducing the
risk of unemployment. They assist newcomers through housing, guidance, and job-related information,
making migration more accessible and appealing.
• The Todaro and Harris-Todaro models still apply to developing countries even when urban wages are not set
by institutions like minimum wage laws. Recent research shows that similar outcomes—such as high wages
in the urban modern sector alongside unemployment—can result from market-based forces. These include
imperfect information, labor turnover, and efficiency wage practices.
⚬ Labor turnover refers to workers leaving jobs, prompting employers to offer higher wages to retain
skilled labor and avoid the costs of frequent hiring.
⚬ Efficiency wage theory explains that firms may deliberately pay above-market wages to attract more
productive workers and improve performance. Both theories help explain why wage gaps and
unemployment persist even in the absence of formal wage controls

4 BASIC CHARACTERISTICS
To sum up, the Todaro migration model has four basic characteristics:
• Rational Economic Motivation
⚬ Migration is primarily driven by rational decisions based on the relative costs and benefits, mostly financial but
also psychological.
• Expected Income Differentials
⚬ Migration decisions depend on expected (not actual) urban-rural wage differences. Expected income is
calculated by multiplying the actual urban wage by the probability of finding a job.
• Employment Probability Matters
⚬ The likelihood of getting an urban job is directly related to the urban employment rate and inversely related to
the urban unemployment rate.
• Excess Migration Despite Limited Jobs
⚬ Migration can exceed the growth rate of urban job opportunities because large expected income gaps make it
rational. This leads to persistent urban unemployment, especially in developing countries with major rural-urban
opportunity imbalances.

FIVE POLICY IMPLICATIONS
Although the Todaro theory may initially appear to downplay the importance of rural-urban migration by presenting it as a
simple labor market adjustment mechanism, it actually carries significant policy implications.
• The Todaro model highlights that migration is driven by expected income gaps. Urban-biased development, especially toward
large cities, can lead to excessive migration, causing urban unemployment and weakening rural areas. Balancing rural and
urban opportunities is key to improving social welfare.
• Simply creating more urban jobs without improving rural conditions can backfire. It raises expected income, triggering
induced migration that worsens urban unemployment and reduces rural productivity.
• Expanding education without matching job growth can increase migration and urban unemployment. Employers raise job
requirements, leading more educated rural workers to migrate, worsening job competition in cities.
• Wage subsidies and correcting price distortions can promote labor-intensive production, but they may also worsen urban
unemployment by triggering induced migration. As more urban jobs are created, expected income rises, attracting more rural
migrants. The overall impact depends on existing unemployment levels and rural-urban income gaps.

FIVE POLICY IMPLICATIONS
• Integrated rural development should be prioritized. Focusing only on urban job creation is less effective long-
term than addressing the supply of migrants through rural investment. A balanced approach combining both
rural and urban policies is ideal for reducing unemployment.
Rural and urban areas are deeply interconnected, forming integrated systems where each depends on the other. Rural
regions supply cities with essential agricultural products and raw materials, while cities provide jobs, services, and
markets for rural goods. As rural incomes grow, urban industries benefit through increased demand. Seasonal labor
movement also occurs, with rural workers commuting to cities and urban dwellers helping in rural harvests.
However, urban-focused development and globalization have weakened these linkages. Cities increasingly trade with
other global cities rather than nearby rural areas. As a result, rural regions—especially those far from major urban
centers—often suffer from neglect or exploitation, such as being forced to sell food at low prices.

To address this imbalance, rural areas must retain autonomy and receive targeted poverty reduction efforts.
Policymakers should avoid reinforcing rural-urban income gaps that fuel excessive migration. Instead, creative and well-
designed rural development programs are needed. These should focus on both farm and nonfarm income generation,
employment, healthcare, education, infrastructure (like electricity, water, and roads), and other rural amenities.
The Todaro model supports the need for balanced development. While urbanization is a natural historical trend, the goal
is not to reverse it but to prevent policy-driven distortions that make rural-urban migration artificially high. Long-term
solutions lie in strengthening rural economies and treating rural-urban development as a unified strategy.

7.7 Conclusion: A Comprehensive
Urbanization, Migration, and
Employment Strate

• Cities in developing countries will grow by over 2
billion people in the next 30 years.
• This creates big challenges but also chances for
economic growth.
• Many people move to cities because of better
opportunities, while farming areas need fewer
workers due to improved productivity.

• Most new jobs are found in cities because
businesses grow faster when close to each other
(agglomeration).
• Better rural education gives people the skills and
ambition to work in cities.
• But too much migration to cities can still cause
problems for society.

10 Key Elements for addressing urbanization,
migration, and employment challenges:
1. Creating an appropriate rural-urban economic
balance. A more appropriate balance between rural and
urban economic opportunities appears to be
indispensable to ameliorating both urban and rural
unemployment problems and to slowing the pace of
excessive rural-urban migration.

2. Expansion of small-scale, labor-intensive industries.
The composition or "prod-uct mix" of output has obvious
effects on the magnitude of employment opportunities,
because some products require more labor per unit of
output and per unit of capital than others.

3. Eliminating factor price distortions. There is sample
evidence to demonstrate that correcting factor price
distortions-primarily by eliminating various capital
subsidies and curtailing the growth of urban wages
through mar-ket-based pricing-would increase
employment opportunities and make better use of scarce
capital resources.

4. Choosing appropriate labor-intensive technologies
of production. One of the principal factors inhibiting the
success of any long-run program of employment creation
in both urban industry and rural agriculture is the almost
complete technological dependence on machinery and
equipment from the developed countries.

5. Modifying the linkage between education and
employment. The emergence of the phenomenon of the
educated unemployed is calling into question the
appropriateness of the massive quantitative expansion of
educational sys-tems, especially at the higher levels. Formal
education has become the rationing tunnel through which
all prospective jobholders must pass.

6. Reducing population growth. This is most
efficiently accomplished through reductions in
absolute poverty and inequality, particularly for
women, along with the expanded provision of
family-planning and rural health services.

7. Decentralizing authority to cities and
neighborhoods. Experience shows that
decentralization of authority to municipalities is an
essential step in the improvement of urban policies
and the quality of public services.

8. Leveraging untapped opportunities for urban
dynamism. With strong, pro-poor rural development
policies in place, many developing countries in Africa, Asia,
and Latin America can still make gains in harnessing the
growth potential of developing-country cities, with ongoing
attention to preparing for its possible migration
implications.

9. Addressing the desperate poverty needs of the
poor now living in urban slum conditions. As poor
rural residents continue to migrate to urban areas,
there is a growing phenomenon of the "urbanization of
global poverty," even if more than half of the poor will
be found in rural areas for the next decades.

10. Anticipating and assisting the new "climate
mignants. This needs to be anticipated and
planned for. A critical part of the solution is more
effective rural development, from better access to
sustainable irrigation to improved rural
institutions.

Lesson Environment and Economic Growth.pptx

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