Study Notes
Harris-Todaro Model
Harris-Todaro Model
Introduction
The model of growth has been propounded by John R. Harris and Michael P. Todaro.
The model explains the apparently paradoxical relationship of accelerated rural-urban
migration in the context of rising urban employment.
Elements of the Model
1. Rural-urban migration is stimulated by rational economic considerations of relative benefits
and costs mostly financial but also psychological.
2. The decision to migrate depends upon expected rather than actual urban-rural real wage
differentials where expected differential is determined by the interaction of tow variables, the
actual urban-rural wage differential and the probability of successfully obtaining employment
in the urban sector.
3. The probability of obtaining an urban is directly related to the urban employment rate and
inversely related to urban unemployment.
4. Migration rates in excess of urban top opportunity growth rates are not only possible but
also rational and even likely in the face of wide urban-rural expected income differential.
High rates of urban unemployment are, therefore, inevitable outcomes of serious imbalance
of economic opportunities between urban and rural areas in most developing countries.
Implications of the Model
The model provides an adjustment mechanism by which workers allocate themselves between
rural urban labour markets. At the same time, it suggests that there is a need for a
comprehensive migration and employment strategy. The key elements of such a strategy Carl
stated as follows:
1. Creating an appropriate rural-urban economic balance
The main thrust of the strategy should be on the integrated rural development, spread of small-
scale industries, reorientation of economic activity and social investment in rural areas. The
strategy based on this element would help mitigate urban and rural unemployment problem on
one hand and discourage the migration on the other.
2. Labour-intensive industries
To slow down the face of rural-urban migration and to create employment opportunities in rural
areas, stress should be on the labour-intensive industries. The expansion of small scale and
rural industries can be accomplished directly by the government investment and incentives and
indirectly through income distribution to the poor.
3. Labour-intensive technologies of production
The development experience of developing countries that in initial stages these countries have
been almost dependence on labour technology. The technological dependence of developing
nations on imported machinery and equipment from developed nations has been one of the
main factors affecting the long run programmes of employment generation both in urban
industry and rural agriculture. To reduce this dependence, domestic efforts should be made for
the development of small scale, labour intensive and low-cost methods for meeting the rural
2
Harris-Todaro Model
infrastructure needs including roads, irrigation, drainage, essential health and elementary
education services.
4. Eliminating factor price distortions
Elimination of factor price distortions is necessary to create employment opportunities and to
make better use of scarce capital. This can be done by eliminating various capital subsidies and
curtailing the growth of wages through market-based pricing. How far and to what extent these
policies succeed is a matter of debate. Correct pricing policies by themselves may prove
insufficient to alter the employment situation.
5. Linkage between education and employment
Education and employment are the basic objectives of development. Education is necessary for
a satisfying and rewarding life. It plays a key role in the ability of a developing country to absorb
modem technology and develop the capacity for self-sustaining growth and development.
Education is fundamental to enhancing the quality of human life and ensuing economic and
social progress. These benefits of education should be viewed as an instrument of employment
generation. A system of education must be integrated with the employment prospects. A
developing country should design education system in a way that it meets the needs of rural
development and created employment opportunities for the prospective jobholders.
6. Reducing population growth
An employment generating policy must aim at reducing population growth through reduction of
absolute poverty and inequality, expanded provision of family planning and rural health services.
The long run solution of employment and urbanization problems required the lowering of high
rates of population growth. Population and labour supply reductions constitute an essential
ingredient for any policy to combat the severe employment problems that developing countries
face now and likely in the future too.
7. Role of local self-governments
The role of local self-government has been suggested to minimize the flow of migration from
rural to urban areas. Decentralization of authority to municipalities and village panchayats is
considered an essential step in improving the quality of public services at the local level. It is
presumed that local officials have greater information and knowledge about local conditions,
local people and their problems. Local officials play a key role when they are made accountable
for their performance and service to local people. Decentralization with increased authority of
cities and villages has been a major international trend in the organization of government.
Relevance of the Model
The model is relevant to developing countries even if the wage is not institutionally determined.
Recent literature on rural-urban migration has confirmed that emergence of high modern-sector
wage alongside unemployment can also result from market responses to imperfect information,
labour turnover and other common features of labour market. While this model focuses on the
institutional determinants of urban wage rates above the equilibrium wage, others have sought
wage explain this phenomenon by focusing on the high cost of labour turnover in urban areas
3
Harris-Todaro Model
and the nation of an efficiency wage; an above-equilibrium urban wage enables employers to
secure a high-quality work force and greater productivity on the job.
