Where to Create Jobs to Reduce Poverty: Cities or Towns?

24 Pages Posted: 27 Apr 2018

See all articles by Luc Christiaensen

Luc Christiaensen

World Bank

Joachim De Weerdt

University of Antwerp - Institute of Development Policy and Management; KU Leuven - Centre for Institutions and Economic Performance (LICOS); Economic Development Initiatives (EDI)

Ravi Kanbur

Cornell University; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Date Written: May 22, 2017

Abstract

Should public investment be targeted to big cities or to small towns, if the objective is to minimize national poverty? To answer this policy question, this paper extends the basic Todaro-type model of rural-urban migration to the case of migration from rural areas to two potential destinations, secondary town and big city. The analysis first derives the labor income, migration cost and poverty line conditions under which a poverty gradient from rural to town to city will exist as an equilibrium phenomenon. Then sufficient statistics are developed for the policy decisions based on these parameters. The empirical remit of the model is illustrated with long-running panel data from Kagera, Tanzania. Further, the paper shows that the structure of the sufficient statistics is maintained in the case where the model is generalized to introduce heterogeneous workers and jobs.

Keywords: Inequality, Labor Markets, Employment and Unemployment

Suggested Citation

Christiaensen, Luc and De Weerdt, Joachim and Kanbur, Ravi, Where to Create Jobs to Reduce Poverty: Cities or Towns? (May 22, 2017). World Bank Policy Research Working Paper No. 8069. Available at SSRN: https://ssrn.com/abstract=3169615

Luc Christiaensen (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Joachim De Weerdt

University of Antwerp - Institute of Development Policy and Management ( email )

City campus building S
Lange Sint Annastraat 7
Antwerp, 2000
Belgium

KU Leuven - Centre for Institutions and Economic Performance (LICOS) ( email )

Waaistraat 6 - box 3511
Leuven, 3000
Belgium

Economic Development Initiatives (EDI) ( email )

P.O. Box 393
Bukoba
Tanzania

HOME PAGE: http://www.edi-africa.com

Ravi Kanbur

Cornell University ( email )

301-J Warren Hall
Ithaca, NY 14853
United States
607-255-7966 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://www.kanbur.dyson.cornell.edu

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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