Working Paper T9. Segmentation, Network Multipliers and Spillovers: A Theory of Rural Urban Migration for a Traditional Economy

Abstract

Economic theories portray wage differences and income-diversification as key determinants of rural-urban migration in developing countries. This paper develops a dynamic theory where economic and social variables work in tandem to shape and accelerate such movement. While existing theories portray migration as a single flow, the new theory highlights spillovers between and contrasts in how social networks and interactions impact on two separate, yet interconnected flows of rural urban migrants. Two empirical illustrations are deployed, both from Karnataka, India. In the first, adult male and autonomous child labour migrants make up the two flows; in the second we consider two flows in rural contexts where patterns of social interactions and network access are influenced by caste. Long-term migration features as equilibria in village level social systems. The comparative static analysis of these equilibria gives rise to social network multipliers, another key innovation