Rural-Urban MigrationRural-Urban MigrationA Lecture Delivered to Undergraduate Students taking Rural Development at

the then Faculty of Agriculture, Makerere University, Kampala, Uganda in April

2008

ByMangasini A. Katundu

Moshi Co-operative University, Tanzania

ObjectivesObjectivesTo discuss the basic features and To discuss the basic features and

assumptions of Lewis-Fei-Ranis assumptions of Lewis-Fei-Ranis modelmodel

To discuss strength and To discuss strength and weaknesses of Lewis-Fei-Ranis weaknesses of Lewis-Fei-Ranis modelmodel

To outline the main features of an To outline the main features of an “expected income” model and “expected income” model and their policy implicationtheir policy implication

The Lewis-Fei-Ranis modelThe Lewis-Fei-Ranis model

The Lewis-Fei-Ranis modelThe Lewis-Fei-Ranis model Also known as Also known as the Lewis-Fei-Ranis the Lewis-Fei-Ranis

model of developmentmodel of developmentIs the best known modelIs the best known modelCreated by a Nobel Laureate W. Created by a Nobel Laureate W.

Arthur Lewis in 1954Arthur Lewis in 1954Formalized in1961 by prof. Gustav Formalized in1961 by prof. Gustav

Ranis and John FeiRanis and John Fei

Basic assumptions of the modelBasic assumptions of the model

Basic assumptions of the modelBasic assumptions of the model1: 1: Underdeveloped economies like Underdeveloped economies like

Uganda consists of two sectors:Uganda consists of two sectors:

A traditional subsistence sectorA traditional subsistence sector ruralrural

A high productivity modern industrial A high productivity modern industrial sectorsector

urbanurban

Basic assumptions of the modelBasic assumptions of the model

2: People normally move from a 2: People normally move from a traditional subsistence sector to traditional subsistence sector to modern urban industrial sector for modern urban industrial sector for economic reasonseconomic reasons

traditionalmodern

Economic reasons

Basic assumptions of the modelBasic assumptions of the model3: 3: traditional subsistence sector consist traditional subsistence sector consist

of of zero or very low productivity and zero or very low productivity and surplus labour while surplus labour while

discouraging factordiscouraging factor4: modern urban industrial sector is 4: modern urban industrial sector is

characterized by high productivity and characterized by high productivity and employment opportunitiesemployment opportunities

encouraging factorencouraging factor

Basic assumptions of the modelBasic assumptions of the model5: 5: both labour transfer and urban employment both labour transfer and urban employment

growth are bought about by output growth are bought about by output expansion in the modern sectorexpansion in the modern sector

6: the speed with which they occur is given by 6: the speed with which they occur is given by the rate of investment or capital the rate of investment or capital accumulation in the modern sectoraccumulation in the modern sector

7: urban wages would have to be at least 30% 7: urban wages would have to be at least 30% higher than average rural income to induce higher than average rural income to induce workers to migrate from their home areasworkers to migrate from their home areas

Basic assumptions of the modelBasic assumptions of the model

8: 8: the level of wages in the industrial the level of wages in the industrial sector is assumed to be constantsector is assumed to be constant

9: However, at this constant urban 9: However, at this constant urban wage, the supply of rural labour is wage, the supply of rural labour is considered to be perfectly elasticconsidered to be perfectly elastic

The Lewis ModelThe Lewis ModelReal wageReal wage

WW

A A

Quantity of labourQuantity of labour

sF G H

0 L1 L2 L3

D1

D2

D3

D1(K1)D2(K2) D3(K3)

K3 K2 K1

modern sector

> >

wages

profits

The Lewis ModelThe Lewis Model OA represents the average level of OA represents the average level of

real subsistence income to traditional real subsistence income to traditional rural sectorrural sector

OW real wage in the capitalist sectorOW real wage in the capitalist sector At this wage the supply of labour is At this wage the supply of labour is

assumed to be “unlimited” or assumed to be “unlimited” or perfectly elastic, as shown by perfectly elastic, as shown by horizontal labour supply curve WS. horizontal labour supply curve WS.

Given a fixed supply of capital, K1, in Given a fixed supply of capital, K1, in the initial stage of modern sector the initial stage of modern sector growth.growth.

The Lewis ModelThe Lewis Model OL1=total modern sector employmentOL1=total modern sector employment OD1FL1=total modern sector outputOD1FL1=total modern sector output The surplus output shown by the area The surplus output shown by the area

WD1F=total profitWD1F=total profit It is assumed that all these profits are It is assumed that all these profits are

reinvested. reinvested. The total capital stock in the modern sector The total capital stock in the modern sector

will rise from K1 to K2,will rise from K1 to K2, causing total product curve of the modern causing total product curve of the modern

sector to rise, sector to rise, hence induces a rise in the demand for labour.hence induces a rise in the demand for labour.

Strength of the modelStrength of the model The model is analytically strong The model is analytically strong

especially in describing two major especially in describing two major elements of the employment problem:elements of the employment problem:

The structural and economic The structural and economic differences between the rural and the differences between the rural and the urban sectorsurban sectors

The central importance of the process The central importance of the process of labour transfer between rural and of labour transfer between rural and urban sectorsurban sectors

weaknesses of the modelweaknesses of the model The model fail to explain the The model fail to explain the

underdevelopment in third world underdevelopment in third world countries in three aspects:countries in three aspects:

1: the model assumes that,1: the model assumes that, the rate of labour transfer and the rate of labour transfer and

employment creation is proportional to employment creation is proportional to the rate of capital accumulation, the rate of capital accumulation, the faster the rate of capital the faster the rate of capital accumulation, the higher the growth accumulation, the higher the growth rate of the modern sector and the rate of the modern sector and the faster the rate of job creation.faster the rate of job creation.

weaknesses of the modelweaknesses of the model Although total GNP would rise, Although total GNP would rise,

all the extra income and output growth all the extra income and output growth is distributed to the few owners of is distributed to the few owners of capital whilecapital while

income levels of the masses of income levels of the masses of workers remain unchanged, hence no workers remain unchanged, hence no improvement in social welfareimprovement in social welfare

weaknesses of the modelweaknesses of the model2:the model assumes that surplus 2:the model assumes that surplus

labour occurs in rural areas while labour occurs in rural areas while there is full employment in urban there is full employment in urban areas, areas,

this is not with third world countries,this is not with third world countries,

There is substantial open There is substantial open unemployment in urban areas but unemployment in urban areas but almost no general surplus labour in almost no general surplus labour in rural locations.rural locations.

weaknesses of the modelweaknesses of the model3: 3: the model assumes constant real the model assumes constant real

wages inwages inUrban areas,Urban areas,

this however is not the case with the this however is not the case with the developing countriesdeveloping countries

where in most cases real wages both where in most cases real wages both in absolute and relative terms tend to in absolute and relative terms tend to rise. rise.

An “expected income” modelAn “expected income” model

Major features of the modelMajor features of the modelMigration process is affected by:Migration process is affected by: Social factorsSocial factors

desire of migrants to break away from desire of migrants to break away from traditional constraints of social traditional constraints of social organizationorganization

Physical factorsPhysical factors climate, floods, droughts, fertile soilsclimate, floods, droughts, fertile soils

Demographic factorsDemographic factors reduction in mortality rates, higher reduction in mortality rates, higher

rate of rural popn. growthrate of rural popn. growth

Major features of the modelMajor features of the model Cultural factorsCultural factors Security of the urban extended familySecurity of the urban extended family

Communication factorsCommunication factors Improved transportation, urban-oriented Improved transportation, urban-oriented

education systemeducation system

Factors that discourage people to stay at Factors that discourage people to stay at the place of origin are “push factors” (-ves)the place of origin are “push factors” (-ves)

Factors that encourage people to move to Factors that encourage people to move to the place of destination are “pull factors” the place of destination are “pull factors” (+ves)(+ves)

Major assumption of the modelMajor assumption of the model

1:The model assumes that,1:The model assumes that,People move from rural to urban as People move from rural to urban as result of expected rather than actual result of expected rather than actual earningsearnings

Expected earnings

ruralurban

Major assumption of the modelMajor assumption of the model2: 2: men migrate more than womenmen migrate more than women3: Younger people migrate more than older 3: Younger people migrate more than older

ones, age of 15-24yrsones, age of 15-24yrs4: most people migrate from small to large 4: most people migrate from small to large

town centerstown centers5: most people migrate in shorter distances5: most people migrate in shorter distances6: more educated people migrate more than 6: more educated people migrate more than

less educated peopleless educated people7: those people who are economically well 7: those people who are economically well

migrate less than poor peoplemigrate less than poor people

Major assumption of the modelMajor assumption of the model8: 8: cost of migration may also influence cost of migration may also influence

a decision to migratea decision to migrate9: information flows also influence a 9: information flows also influence a

decision to migratedecision to migrate10: government policies like taxes may 10: government policies like taxes may

also influence people to migratealso influence people to migrate

Thank youThank you