Rural-urban migration and the urban public economy in a developing country

The most widely debated thesis concerning urban growth in the Third World is that of "over-urbanization". The thesis asserts that urbanization in most developing countries is demographic and not economic, being characterized by excessive rural-urban migration. It uses macro-theoretic models and ignores the role of regional factors specific to rural and urban economies. This dissertation argues that the empirical and theoretical foundations of the hypothesis are weak. Urbanization and migration problems ought to be approached regionally for two reasons. First, inter-regional migration patterns are extremely heterogeneous. Second, migration is complex, involving movements between origins and destinations in the presence of attractions and obstacles. Using a regional approach, this research emphasizes the importance of urban public economies in rural-urban migration.; I show that in a regional framework, "over-migration" depends upon the returns to scale in urban and rural private production, returns to sharing in urban public good provision, and urban agglomeration economies and congestion diseconomies. Migration is likely to create positive and negative externalities for the urban public economy and is likely to affect public good supply by municipal governments. When municipalities are considered as economic agents, they may react to over-migration, causing it to disappear in the long run.; The findings in this research have important policy implications for developing countries. Policies suggested by past research, namely, wage subsidies to urban private producers to encourage employment creation; liberally expanding employment in urban public projects; and stopping migration from rural areas may not only be unwarranted, but also costly. We stress the role of "agglomeration-augmenting" and "congestion-managing" policies and development of key public infrastructure such as water, sewer, electricity, and transportation networks in selected urban areas so as make them prospective centers of rural-to-urban as well as urban-to-urban migration. The methods for financing local public goods constitute important elements in such policies. Taxation on fixed property is shown to create larger municipal budget deficits compared to per capita or head taxes.; Urbanization contributes to economic development in countries like India. The pessimistic conclusions by the over-urbanization theorists, for example, migration from rural areas in LDCs should be stopped or controlled do not have a sound empirical or theoretical basis.