Harris–Todaro Model

Published Mar 22, 2024

Definition of the Harris–Todaro Model

The Harris–Todaro model is an economic theory that explains the migration of labor from rural to urban areas in developing countries. This model is based on the concept that individuals make migration decisions not solely on the basis of wage differentials between the urban and rural sectors but also considering the probability of obtaining employment in the urban sector. The model suggests that the expected urban wage, adjusted for the likelihood of finding a job, must be higher than the rural wage for migration to occur. It highlights the role of unemployment and underemployment in influencing migration patterns and urban unemployment in developing economies.

How the Harris–Todaro Model Works

Consider a developing country with a significant discrepancy in wages between the urban and rural sectors. In the rural area, employment is readily available, but wages are low. The urban area offers higher wages but comes with a higher risk of unemployment. According to the Harris–Todaro model, an individual will decide to migrate from the rural to the urban area if the expected urban wages, accounting for the risk of unemployment, are greater than the wages they could earn in the rural sector. This decision-making process leads to a situation where urban areas experience an influx of migrants, resulting in higher urban unemployment rates. The model emphasizes the importance of creating policies that balance rural and urban development to manage migration effectively.

Example

Imagine a farmer, Raj, living in a rural part of a developing country. He hears that factory jobs in the city pay three times as much as he earns from farming. However, he also knows that finding a job in the city isn’t guaranteed due to high competition. According to the Harris–Todaro model, Raj will consider migrating if the expected urban wage (i.e., the high wage multiplied by his estimated probability of finding a job) outweighs his current rural wage. If many individuals replicate Raj’s thought process and migrate, this model shows how urban areas can end up with a large, unemployed population despite higher wages, contributing to the urban-rural divide in developing economies.

Why the Harris–Todaro Model Matters

This model is crucial for policy-makers in developing countries as it provides insights into the causes and consequences of rural-to-urban migration. By understanding the dynamics between rural employment, urban wages, and the probability of finding a job, governments can design more effective policies to manage urbanization and its associated challenges. Solutions might include improving rural job opportunities, ensuring more equitable wage distribution, or increasing job creation in urban areas to reduce the rate of unemployment. Recognizing the implications of the Harris–Todaro model helps in addressing the issues of urban slums, underemployment, and the allocation of public resources, highlighting the need for comprehensive rural and urban development strategies.

Frequently Asked Questions (FAQ)

What are the implications of the Harris–Todaro model for rural development?

The Harris–Todaro model suggests that enhancing rural development and creating more job opportunities in the rural sector can decrease the incentive for migration to urban areas. This would help balance the labor market, reduce urban unemployment, and encourage sustainable development. By focusing on improving agricultural practices, investing in rural infrastructure, and providing access to education and healthcare, policy-makers can make rural areas more attractive for the workforce, potentially slowing down the rate of urban migration.

How does the Harris–Todaro model address the issue of urban unemployment?

The model indirectly addresses urban unemployment by emphasizing the need for policies that reduce the excessive migration flow from rural areas. By creating more job opportunities in urban areas that match the skill set of the migrant population or by enhancing skills through vocational training, governments can ensure better job matches and reduce unemployment. Additionally, implementing social protection programs for the unemployed can mitigate the impact of urban unemployment.

Can the Harris–Todaro model be applied to developed countries?

While primarily focused on developing countries, aspects of the Harris–Todaro model can also be relevant in the context of developed countries, especially in analyzing migration patterns from economically weaker regions to more prosperous urban areas. However, the dynamics might differ due to better social safety nets, more diversified economies, and different socio-economic factors influencing migration decisions in developed countries. The model’s fundamental theory on migration decision based on expected benefits versus current situation remains universally applicable.