Embed Size (px)
Citation preview
De-~elopment Research Center
Discuss ion Papers
No. 25
Y i g r a t i o n , Denographic Change and Income
D i s t r i b u t i o n i n a Nodel o f a
Developing Country
by
Irma Xdelnan U n i v e r s i t y of Haryland
Sherman Robinson P r i n c e t o n U n i v e r s i t y
Q , t
- .w
'2 -.- NOTE: Discuss ion paper; a r e p r e l i s i n a r y n a t e r i a l s c i r c u l a t g d t o s t i m u l a t e
d i s c u s s i o n and c f l t t c a l comnent. References i n p u b l f c a t i a n t o Discuss ion Pape r s should be c l e a r e d wi th t h e t o p r o t e c t t h e t e n t a t i v e c h a r a c t e r of t h e s e pape r s . The virvs of t h e a u t h o r and should n o t be of t h e World Bank.
-
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
X f g r a t i o n , Demographic Change a n d Income
D i s t r i b u t i o n i n a Xode l o f a
D e v e l o p i n g C a u n t r y
Irma Adelman U n i v e r s i t y o f Mary land
Sherman Rob inson P r i n c e t o n U n i v e r s i t y
R e s e a r c h Program i n Development S t u d i e s Woodrow Wi l son S c h o o l - P r i n c e t o n U n i v e r s i t y - P r i n c e t o n , N e w ~ e r s e p
e F e b r u a r y 1977
D i s c u s s i o n P a p e r # 7 1
Tlie work d e s c r i b e d i n t h i s p a p e r h a s b e e n s u p p o r t e d b y t h e
S o t c : D i s c u s s i o n p d p e r s of t h e R e s e a r c h P r o g r a a i n S t u d i e s a r e p r e l i m i n a r y m a t e r i a l c i r c u l a t e d t o s t i m u l a t e cox?:cnr. P l e a y c do ncit r e f e r to d i s c u s s i o n p a p e r s
Development R e s e a r c h C c n t e r of t h e World Sank. The v i e w s e x p r e s s e d a r e o u r o m r v f l e r t t hose o f t h e !dorid Sank.
and do n o t n e c e s s a r i i : ~
Tab le of C o n t e n t s
1 . 1 :I L r o d i ~ i , L ion
! I . Yodel S~irnmnry
Lconumtc Y o d e l : S t a t i c P a r t
Econom i : ?lode1 : Dynamic P a r t 1 l3
I!ou~;cho l d Composi t ion
?li g t'il t i o n >lode 1
Labor F o r c e Growth and Composi t ion
111. Est. irnation and E m p i r i c a l Dynamics
D a t a , Model E s t i m t i o n , and V a l i d a t i o n
Rnv i c Mode 1 Dynamics
I V . Demograph L C E x p c r i a e n t s
Y i g r n t i o n Rate V a r i a t i o n s
Dalnnccd Lnbor Growth
L'nb.11nnct.d L,tbur Growth
V. C n n c l u s i o ~ l L
I . ISTRODUCTION
T h i s p a p e r i l l u s t r a t e s t h e a p p l i c a t i o n of a n e x t y p e of
p l a n n i n g n o d e l t o t h e s t u d y of t h e r e l a t i o n s h i p between d e , o g r a ? h i c b I
phenomena and tlla work ings o f t h e economy, e s p e c i a l l y t h e b i s t r i b u t i c n I
o f income and t h e e x t e n t o f p o v e r t y . The a v e r a l l model c o b s i s t s o f
a s t a t i c wage and p r i c e endogenous computab le g e n e r a l e q u i i b r i u n 1 (CGE) c o r e model l i n k e d t o a p a r t i a l l y a d a p t i v e dynamic mogel. The
I
CCE model o f t h e econonp c c n s i s t s o f a l a r g e s i m u l t a n e o u s Q y s t e e of
e x t r e m e l y n o n- l i n e a r e q u a t i o n s . The two submodels can b e d o n s i d e r e d
a s b l o c k r e c u r s i v e p a r t s of an o v e r a l l model whose behav iod combines
n e o c l a s s i c a l s u b s t i t u t i o n p o s s i b i l i t i e s and market c l e a r i n e q u i l i b r i u m
w i t h n o n- n e o c l a s s i c a l r i g i d i t i e s and d i s e q u i l i b r i u m
T h e model u s e d i n t h i s p a p e r i s a d a p t e d
d e v e l o p e d t o e x p l o r e t h e economic d e t e r m i n a n t s o f t h e d i s t r i b u t i o n
of i n c o n e i n t h e s h o r t t o medium run. ' It t h u s i n c l u d e s a 1 e r y
d e t n f 1c.d n o d e l of t h e e c o n o n i c s y s t e m and i n c o r p o r a t e s a nu b e r o f m mech;in i sms b y which d e n o g r a p h i c phenomena a f f e c t t h e l a b o r
. t t h e ~ c o n o n y Lrl g e n e r a l . I t a l s o i n c l u d e s a model of t h e wo
r n n p o s i t i o n of hu t i s rho lds a n d , i n t h i s e x t e n d e d v e r s i o n , a I i e x i b l e I
r . modrl o f r u r a l - u r b a n m i g r a t i o n . The model does n o t , howeve!, dds-
I
f o r s t u d y i n g t h e fmpact of d e x o g r a p h i c phenonena on t h e ecsnony a n d
; , g ~ r c j ; : i t ~ t ! i ~ po?ul,?:loil by a g e , s e x , o r l o c a t i 6 n ( e x c e p t r e r a l - u r b a n ) II
fr,r e x a m i n i n g t h e r o l e of m i g r a t i o n , i t i s n o t d e s i g n e d f o r e s a n i n i a g
mci , e x c e p t f o r m i g r a t i o n , t h e r e i s no feedback- of economic phenomena
ori p o p u l a t i o n o r l a b o r f o r c e . Thus , w h i l e c h e n o d e l is r e 1 4 s u i t e d
ti~
t. f c
cti'
si~
ck f
roz
ec
on
on
ic v
;xri
ab
les
to
de
co
gra
?h
ic v
ari
ab
les
su
ch
:IS 1
~
:c,r
?.:
~o
si~
1 o
n o
r I-r
ite
of
gro
wth
o
f t:
'le
po
pu
lati
on
. I I ~
Tn
crcn
sed
c
on
ce
rn w
ith
p
op
ula
tio
n
iss
ue
s a
nd
in
cre
as4
d
I
rec
og
nit
ion
of
tI:~
ir c
a~
ple
xit
y hav
e le
d
to
the
co
nst
ruc
rio
n
04 I
sev
era
1 l
ar
~e
s
ca
le
sim
ula
tio
n n
od
els
fo
r a
na
lyz
ing
e
co
no
mic
-dd
n~
~ra
~h
ic
2 in
tt.r
nc
tiu
ns.
lt
~e
sc
zo
de
ls v
ary
in
a
nu
ab
er
of
dif
fere
nt
way
%:
in
I
tiic
ir
de
grc
t, o
f c
on
?le
xit
y;
in
the
de
tail
of
the
ir d
es
cri
pti
on
of
the
eco
no
my
; in
th
e n
atu
re o
f th
eir
de
no
gra
ph
ic d
isa
gg
reg
ati
on
;; i
n
I I
thc
d
cz
rce
of
fee
db
ac
k
be
txe
en
ec
on
om
ic
and
d
emo
gra
ph
ic F
hen
on
ein
a;
I I
in
thc
nn t
ure
of
the
a
ssu
ne
d
pro
du
cti
on
sa
vin
gs
, la
bo
r fo
rce
?a
)rti
ci-
I
pa
tio
n
nr:d
f
er
tili
ty r
ela
tio
ns
hip
s;
and
in
th
eir
de
gre
e o
f co
un
(try
I I
qp
ec
if ic
L t
y n
:~d
ez
?fr
?c
nl
iin
ple
ne
nta
tio
n.
Ne
ve
rth
ele
ss,
the
s
tku
ctu
re
I
of
all
th
eq
e n
od
els
is
sin
ila
r a
nd
ca
n
be
see
n
tc c
on
sis
t o
f th
ke
e
pa
rts
: (1
) an
ec
on
om
ic
no
de
l d
e~
~r
ib
in
g
pro
du
cti
on
, fa
cto
r u
se 1 an
d
I
com
rnod
i ty
sli
pp
li rs ;
(2)
a d
crn
oar
aph
ic a
od
el,
d
i~a
gg
ieg
ate
d usu
dll
y
I
Ily
.~f
ic, s
ex
, lo
rati
on
an
d --
in
so
cc
ca
ses
-- e
du
ca
tio
na
l le
ve
l1 a
nd
I (3
) a
sc
t
of
rcc
urs
ivc
li
xk
ng
es
oe
tve
en
th
e
ec
on
on
ic
-nd
d
ern
og
rdp
hic
i:(~
llc Is.
Th
e ii
iik
ng
es
u:i
~lA
lly
xo
rk
thro
ug
h
eco
no
rnik
in
flu
en
ce
s i
n
I I f
cr
tlll
ty,
mo
rta
lity
a
nd
n
igrn
tio
n
be
ha
vio
r,
on
the
o
ne
ha
nd
, aq
d
- - I
t
thro
ilq
tl
dc
n0
~ra
pn
ic in
flu
en
ces
on
the
la
bo
r fo
rce
, s
~v
ing
s, a
nd
ith
e L
I
w
zo
vc
rnx
cn
t b
ud
ge
t,
011
t!ie
o
tilc
r.
I I 0
1)cg
sp i
tc
vn
~-
ia: io
ns
i:~
s
pe
cif
ica
tio
n,
xo
st
of
the
ao
lel(
s
I b
ui
Id
In
n
n ,l~t:-nntaIist b
f,
~s
5y
ass
un
ing
(v
ith
li
ttle
ex
pir
Lz
21
P
3 J
uq
t 1
fi
cn
t ior.)
tha
t th
c
sz.;
lng
s pr
open
si:;
v.
of
ho
ase
b.o
lds
Is
:-
.e-'
I*-'
3
pL
LV
CL
:,- -
rcl,
7ttT
:i to
tlie
d
c;lc
nd
encj
. ra
:io
; th
a:
t:le
i.
ong
run
;;
rzd
::ct
i-n
fc~;tL>:;,
6 :?odern:e r a t e o f ? o ? u l a t i ; = growth i s o p t i m a l . 3 0 t h v e r y n i g h a ~ d
\ ? c r ; ~ !ow r a t e s y i e l d e d lo...-er p e r c a p i t a i n c o a e s i n t h e l c n g r u n . I n I
I
t!le s n z e v e i n , t h e I . L . O . z c d e l ( B a c h u e ) , i n which t h e econoniic s y s t e a *. - I
is dezand d r i v e o ; y i e l d e d t h e r e s u l t t h a t s u b s t a n t i a l v a r i a t i o i n s i n I
popu1, i t ion p r o i i t ! ~ Save l i t c l e e f f e c t on p e r c a p i t a income, on i n c o E e I
dis : r :hut ion, o r on t h e i n c i d e n c e and l e v e l of p o v e r t y f o r p s r k o d s u? I
t o nbcu t 35 g e a r s . F u r : h s r s o r e , i n Bachue, t h e t r a n s i i i o n t o bower I
r z ~ t e s o f p ~ p u l a t i c n growth r e s u l t s i n n e a r - t e r n d s c l i c e s i n c a p i t a I
i n c o r e x h i c h t u r n a round o n l y a f t e r 35 t o 50 y e a r s . I I I
In t h i s p a ? e r , we e x p l o r e s o r e of t h e i s s u e s r a i s e d y b thc Sinon and anchue n o d e l s i n t h e c o n t e x t of o u r s h o r t t o med/un run
a o d e l . X e r e p o r t on a nuizber o f e x p e r i x e n t s w i t h t h e model wh c5 4 I
c x p l o r e t h e e f f e c t s on t h e economy of a l t e r n a t i v e p a t t e r n s of d u r a l - - I I
u rban x i g r a t i c n and l a b o r f o r c e growth o v e r a n i n e y e a r p e r i o d . I n I I
p a r t i c u l a r , we a n a l y z e t h e e f f e c t s on t h e d i s t r i b u t i o n o f inconk and I
rhc e x t e n t u f p o v e r t y . Our results f o r Korea b r o a d l y s u p p o r t t h e I
c u n c l u u i o n s f rom t h e Siinon model even though o u r model i n c o r p o r t e s P o n l y one e l c z e n t of p o s i t i i g e feedback from p o p u l a t i o n growth t o ( t h e ' '
1 C C O ~ I O E ~ -- t h a t o p e r a t i n g th rouph t h e goods m a r k e t s , f o r - , ~ g r i c u l : u r a l goods . Xe f i n d t h a t r a p i d o v e r a l l l a b o r fort< g r o q t h
L I I
l e i ~ d s t o h k h e r i n c o n e s f o r t h e poor t h a n does low is?bor f a c e ( B * ~
xrowrh np.d L h a t n o d c r a t e g r o v t h i s t h e b e s t o f a l l . - I
II
UC
c
c- r
mw
(3
6
m
U
N
LU
X
LJ 6
The n o d e l i n c o r 7 o r a t e s o p t i n i z i n g r e s p o n s e s by f i r m a a d
h o u s ~ t ~ o l d s t o a wide r a n g e of ? o l i c y i n s t r u n e n r s . I t i s a l s o c a p a b l e I
O F p o r t r a y i n g a . ~ a r i e t y of i a s t i t u t i o n a l p r i n c i p l e s i n t h e o p e r a t i o n ,
O F c r e d i t n a r k e t s and f a c t o r i r d r k e t s , t h e d e g r e e o f mono o l y , and I' I even t h e o b j e c t i v e E u n c t i o n s of f i r n s .
For e a c h p e r i o d , t h e computa t ion o f t h e model. i s decomposed I I
i n t o two p a r t s -- a s i a u l t a n e o u s , s t a t i c p a r t , c o n s i s t i n 4 p r i x a r i l y I
of a n economic s u b n o d e l , and a d y n a n i c p a r t , c o n s i s t i n g d f e c o n o n i c , I
I
demographic and n i g r a ~ i o n submodels . The s t a t i c model , d a l l e d I
S t a g e XI i n o u r book, d e s c r i b e 5 hov f a c t o r and p r o d u c t q a r k e t s r e a c h 1 1
an e q u i l i b r i u m c o n s t r a i n e d by t h e i n v e s t m e n t c o m i t m e n t s u n d e r t a k e n
e a r l i e r , by r i g i d i t i e s imposed by f o r e i g n t r a d e , and by q n s t i t u t i o n a l
r f g i d i t i e s i n t h e o p e r a t i o n of p r o d u c t and l a b o r m a r k e t s . Money a n d I
t h e a v e r a g e p r i c e l e v e l e n t e r t h e model i n a n e s s e n t i a l why. The I
I
d y n a n i c model c o m p r i s e s a n invest inent submodel , which d e s k r i b e s t h e
c o n t r a c t s made between f i r m s and t h e f i n a n c i a l m a r k e t s t o a c q u i r e fun& I
t o s p e n d on i n v e s t a c n t goods ( c a l l e d S t a g e I i n o u r book); a r u r a l -
urban n i g r a t i o n subnode 1 ; a d e h o i r a p h i c submodel; and modGls which I
gcnr r a t e t h e expec r a t i o n s on which i n v e s t m e n t d e c i s i o n s a i e b a s e d , . - - - I s e t sune of :he ru.]es o f o p e r a t i o n of t h e c - , Jnony , and "a$e" t h e n o d e l
L I - I
economy. - %! I
Xe w i l l f ? r s t d i s c u s s t h e economic model u s i n g d iagrams
r a t h e r than e q u a t i o n s . We w i l l then s e p a r a t e l y d i s c u s s t h e d e ~ o g r a p h i c
s ! :bncdc ls t h a t a r c i n c o r p o r a t e d i n t o t h e o v e r a l l nodel borh i n che
s t . -~c L C and d y n a n i c p a r t s .
E c c a c n i c Xodel : S t a t i c P a r t
The c o r e e c o n ~ z i c n o d e l i s a g e n e r a l e q u i l i b r i u i s model i n
t h a t - a r i c c s a n d y u p p l i e s a r e assuxed t o a d j u s t s o as t o c l e a r a l l I
n a r k e t s , s u b j e c t t o v a r i o u s c o n s t r a i n - . s on f a c t o r m o b i l i t y t h a t
p r e v e n t t h e econoay I r 3 n f u l l y a d j u s t i n g by s e a n s of p u r e !arkst I
mechanisns . The s o l u t i o n i s c a l c u l a t e d by means o f a t a t o d n e n e n t
p r o c e s s which s i n u l a t e s n a r k t t j e h a v i o r ; no a c t u a l t r a n s a c t i i o n s
t a k e p l a c e u n t i l t h e s o l u t i o n is r e a c h e d . The o u t p u t s of t b e s z a t i c
n o d e l e r e " a c t u a l " p r o d u c t i o n , enployinent , p r i c e s , wages anp i n c o a e I
I d i s t r i b u t i o n f o r t h c p e r i o d .
b I
The model i s i t s e l f s u b- d i v i d e d i n t o a number of p a r t s I,
r e p r e s c n t i n p d i f f e r e n t c o r n p u t ~ t i o n a l p h a s e s : s u p p l y , denanb , wage, I
income and p r i c e d c t e r n i n a t i o n . I n F i g u r e 1, t h e p r o d u c t a i d l a b o r
m a r k e t s a r e p i c t u r e d . P r o d u c e r s d e t e r m i n e t h e i r p r o f i t- maximiz ing
demands f c r l a b c r and s u p p l i e s o f p r o d u c t s g i v e n an i n i t i a i Iguess a t I
t h e s o l l r c i o n p r i c e s . Thcse demands f o r l a b o r i n t e r a c t w i t h l a b o r
s u p p l y f u n c t i o n s t o d e t e r m i n e wages and employment s o as t~ c l e a r L I
I > , 1 ;' -. lnbor m a r k e t s . From t h e d e t e n i n a t i o n of employment, wages a n d I
I
r e t u r n s t o c a p i t a l , t h e d i s t r i b u t i o n of i n c o m e r t o t h e e c o n o i ' i c a l l y -2 L
7 n c t f v e p c p u l n t i o n is d e r i v e d . T h i s f u n c t i o n a l _ d i s t r i b u t i o n bf i n c o r e - -
8 B is thcn t r a n s l a t e d i n t o t h e househo ld d i s t r i b u a o n . P a r t sk t h e I
I I
t r t ~ n s l n t f c r ~ ?nvc7veu a d e n o g r a 7 h i c n o d e l o f t h e v o r k e r c o ~ p o s i t i o n
of t ~ o u s c h o l d s t h a t i s d i s c u s s e d s e p a r a t e l y b e l c v . For e a c h s o c i o -
I c c u n o n i c c a t e g o r y of i n t o n e r e c i p i e n z s t h e ncde l d e t e r n i n e s i n c o z e .
t . ~ x c s , n l l o c a t ion t o h o ~ s e h o l d g r o u ? s , t r a z s f e r s , s a v i n g s and
lu
a, 0
U
aJ
.4
U
E!
LJ c
no
a
aJ c;)
LJ a
F i g u r e 2
1 ; A Demand f o r " r o d u c t s and Inco,ne D i s t r i b u t i o n
Expected Wages I Expected Salos
Desired Investment Demand Equation4
Expected Relative
Dosired Investment1
Production Parameters
Accumulated Retained ,
Demand for Invertible Funds
I C I
I
.
- *
k I
Nominal Investrnent~ Expenditures by Firms
Figure 3 DETERMINATION O F INVESTMENT
I
I I
I
Slipply of Credit or Cost o f Capital
- - Clearing of ' ? L
Credit Markets ~
Econonic Hode l : Dynanic P a r t -
The dynnnic par : c a n s i s t s of ; c o l l e c t i o n o f s u b z ~ ~ o d e l s w h i c h I I
s p e c i f y a l l t h e a y n m i c a d j u s t x e z t s and i n t e r t e n p o r z l l l inkages f o r thtz
o v e r a l l nodeg. E s s e n t i a l l y , t h e submodels t a k e t h e r e s b l t s o f t h e s t a t i c I
x o d a l a s exogenous i n p u t and c a l c u l a t e a rrilmbar o f v a r i b b l e s t h a t a r e
used as exogenous i n p u t f o r t h e s t a t i c n o d e 1 i n t h e nexF p e r i o d . T h c I
s e t of s u h n o d e l s i n c l u d e s : a model o f r u r a l - u r b a n r n i g r h t i o n , a mode l of I I
l a b o r f o r c e growth and s t r u c t u r e , a model of t h e l o a n a b l e f u n d s m a r k e t I I
and i n v e s t s e n t d e t e r m i n a t i o n , and f i n a l l y a number of f 6 n c t i o n s v h i c h
d i s c u s s e d s e p a r a t e l y i n tkn n e x t s e c t i o n .
I I . ? d a t e exogenous p a r a n e t e r s ( such as p r o d u c t i v i t y g r o u t b ) . The demo-
Inves tment i n t h e model i s d e t e r m i n e d by e x p l i c i t l I y m o d e l l i n g I
t h e demand f o r i n v e s t i b l e f u n d s by e a c h f i r m s i z e and se ic to r . F i g u r e
g r ; ~ p h i c mode 1s o f r u r a l - u r b a n m i g r a t i o n and l a b o r f o r c e
3 showi t h e model s c h e r i t i c a l l y . P r o d u c e r s form t h e i r dlernands f o r l o a c a b l e
growth a r e
I
f u n d s on t h e b a s i s of e x p e c t e d s a l e s and p r i c e s of i n p u t which a r e , in p t u r n , b a s e d on t h e s o l u t i o n of t h e s t a t i c model f o r t h e b r e - i o u s p e r i o d .
I
C r e d i t is then r a t i o n e d e i t h e r by s e t t i n g an i n t e r e s t r b t e and a l l o d i n g I
tile n - ~ r k c t t o c l e a r a t t h a t r a t e o r by s e t t i n g a t a r g e t t a t e o f expansion I
of c r e d i t and a l l o w i n g ' t h e r a t e of i n t e r e s t t o a d j u s t . & - ( o r d e r t o c l e a r - L
I
t h e l o w a b l e funds m a r k e t . The o u t p u t s of t h i s s u b m o d e l a r e t h e
i I ; I l !ocst?en of l o a n a b l e funds acong f i... s i z e s and s e c t o ~ Q and a n o v e r a k l
I
i n j e c t i o n of c r e d i t i n t o t h e econony . I f t 5 e i n f l a t i o n j a t e i n t h e
n e x t p e r i o d i s as e x p e c t e d , t h e n t h e s e c t o r s > r i l l a c h i e v q t h e i r des i r ec I
! ' I ' .
L s h i g h e r t h a n e d p e c t e d ,
t 1 1 r n rc.71 i n v e s t c e n t w i l l be l o v e r s i n c e t h e
-- -14-
n o n l n a l i n v e s t l e n t s e t i n t h e d y n a a i c s u b n o d e l w i l l n o t p u r c h a s e as
nany r e a l i n v e s t m e n t goods 3s d e s i r e d . I
P n r a r e t e r u p d a t i o g i n t h e d j n a n i c node? ? r o c e e d s , i n
g e n e r a l , i n i n d e p e n d e n t b l o c k s of equat ions- . "or example , I
t e c h n o l o g i c a l 7 r o d u c t i v i t y 7 a r a n e t e r s a r e e x t r a p o l a t e d u s i n g a geo-
n e t r i c growth t r e n d and a r e i n d e p e n d e n t of any d e n o g r a ~ h i c t ends such 1
r a t i a s . S a l e s e x p e c t a t i o n s f o r f i r m s ( r e q u i r e d f o r investment1 ~ d e t ~ r n i n a t i o n ) a r e f o r ~ e d on ik'e b a s i s of p a s t r a t e s of of
a s p o p u l a t i o n p r e s s u r e on n a t u r a l r e s o u r c e s . The s a v i n g s r a t e s
upda ted by n e a n s of a n e s t i m a t e d r e l a t i o n between s a v i n g s r a t e s
s a l e s m o d i f i e d by r e l a t i v e p r o f i t a b i l i t y . Exchange r a t e r e g i + e s I
a r e
and
( f i x e d o r f l e x i b l e ) and f i n a n c i a l r eg imes ( f i x e d i n t e r e s t r a t
o r t a r g e t e d c r e d i t i n j e c t i o n s ) a r e u p d a t e d exogenous ly . F i n
income l e v e l s w i t h o u t any c o n s i d e r a t i o n of demographic depend
I
a c c o u n t i n g r e l a t i o n s h i p s a r e used t o u p d a t e t h e c a p i t a l s t o c k s of
f i r m s , t a k i n g a c c o u n t of p a s t i n v e s t m e n t , d e p r e c i a t i o n and ge t a t i o n i
urban m i g r a t i o n w h i c h i s one of t h e s u b n o d e l s i n t h e d y n a n i c p b r t
i of t l i c o v e r . i l 1 izodei. P i 2 a l l y , t h e r e i s a subi-.odel i n t h e dyn+:iic
p n r l v h l c h d e t e r m i n e s t h e a g g r e g a t e grau:h of :he l a o o r f o r c e $ a d I
i
@ Demographic Submodels
There a r e t h r e e n a j o r demographic n o d e l s i n c o r p o r a t e d i n
t h c o v e r a l l model . F i r s t , t h e r e i s a model of household compo 5 i t i o n - w!lLch d e t e r m i n e s t h e number and c o z p o 5 t : o n of h o u s e h o l d s i n t e
s t n t i c p a r t of t h e o v e r a l l n o d e l . Second , t h e r e i s a model of r u r a i - :I
-15-
a150 i t s s k i l l c 0 ~ , 3 0 s i t i o n .
!luuseilold -- ConposiL@
Ln t h e ~ ~ & t i c x o d e l , x e d e f i n e f i f t e e n househo
c l ~ t e p o r i z e d by t h e occupation of t h e head o f t h e househo d . Each I h o u s c i ~ o l d can have =ore t h a n one x o r k e r and t h e o t h e r wo
work i n o c c u p a t i o n s d i f f e r e n t from t h a t of t h e head of t
I ~ o l d . As p a r t of its s o l u t i o n , t h e s t a t i c n o d e l g e n e r a t
and a v e r a g e income f o r e a c h o f t h e f i f t e e n c a t e g o r i e s o f
r e c i p i e n t s . The pro5len i s t o combine t h e s e v a r i o u s i n c
i n t o h o u s e h o l d s and s o t r a n s l a t e from f u n c t i o n a l o r
t o househo ld incomes.
The t e c h n i q u e we have d e v e l o p e d t o ;:hieve
is h a r e d on knowledge of t h e a v e r a g e number of o t h e r work rs i n I. c n c h house\ io ld c a t e g o r y and t h e i r o c c u p a t i o n a l d i s t r i b u t i
Assuming t h a t t h e a v e r a g e number and o c c u p a t i o n a l c o n p o s i
w o r k e r s i n e a c h househo ld c a t e g o r y i s c o n s t a n t and g i v e n f h e
p o p u l a t i o n and a v e r a g e i n c o n e of a l l worker o r income r e c , I
u. e u r o u p s , i t i s p o s s i b l e t o d e r i v e t h e t o t a l n u r b e r of hous
a v u r a g c income i n e ach househo ld c a t e g o r y . The d e r i v a t i o - -
t
.I i r c l n t f o n s h i p i s g i v e n below.
1C * D e f i n e t h e f o l l o w i n g m a t r i c e s : e II
-.--r--
I H = m a t r i x s u c h t h a t H is t h e s h a r e of " o t h e r i l
of c a t e g o r y J i n h o u s e h o l d c a r e g o r y I . Nocel t h a t
n - c o l u ~ l r . v e c t o r such t h a t n 4 i s t h e a v e r a g e nucber of - " o t h e r s -o rkers" i n h o u s e h o l d s o f c a t e g o r y i .
I I
S = d i s g o n a l m a t r i x such t h a t S = ni and N = 0 , i i i j I I
v - c o l u n n v e c t o r s u c h t h a t w e q u a l s t h e a v e r a g e i i c o n e I I
of w o r k e r s i n c a t e g o r y I . ~ I
y - c o l u r ~ ~ q v e c t o r s s h t h a t y e q u a l s t h e a v e r a g e t d t a l i I
i n c o n e of h o u s e h o l d s i n c a t e g o r y i. ~
p - c o l u n n v e c t o r s u c h t h a t p is t h e t o t a l n u b e r o i
w o r k e r s i n o c c u p a t i o n a l c a t e g o r y I . I '
N o t e t h a t nlHii i s t h e number o f " o t h e r workers'! i n c a t e g o r y j i n I
h = c o l u n r ~ v e c t o r such t h a t h i s t h e t o t a l number i
l ~ o u a e h o l d I . The t o t a l income of a househo ld i s t h e sum of t h ( income
o f
~ of t h e h e a d and of t h e i n c o x e s o f , a l , l " o t h e r workers ." Thus: , k
I y - w + N H w I
m - - ?
I L I
0 r - - * II I
i (1) Y = Q w I
~ where ? = I + S H .
Qii i s t h e t o t a l n u a b e r of workers i n
c a t e g o r y j i n h o u s e h o l d i.
I I
I I
h o u s e h o l d s i n c a t e g o r y i. ~
I t must be t r u e t h ~ t t o t a l household income be ~
S u b s t i t u t i n g from (1).
i d e n t i c a l l y e q u a l L O t o t a l 3 o r k e r i n c o n e . T h e r e f o r e (where
i n d i c a t e s t h e t r a n s 7 o s e ) :
S i n c e t h i s must be t r u e f o r any w , i t f o l l o w s t h a t :
( ' )
om su rvey d a t a a n d , g iven e q u a t i
( 4 ) we can e r a g e incomes and household nu
household c a t e g o r y .
Note t h a t t h e r e Ls no r e s t r i c t i o n on t h e s i g n of t h e e l e n e n t s
of Q-l and i& i s t h e o r e t i c a l l y p o s s i b l e t o have nega t i ve , e e a e n t s i n h C ( a l t h o u g h i t d i d n o t happen i n p r a c t i c e ) . Th i s i m p l i e s t h t s o cany t
b- w workers of a. g iven c a t e g o r y a r e needed a s " o t h e r workers" h a t t h e . ? L
qousehold c a t e g o r y must g e n e r a t e such v o r k e r ~ e x n i h i l o by hav ing a - - 1 n e g a t i v e e n t r y . e
I
I Note a l s o t h a t , w h i l c we do no: e x p l i c i t l y t a k e i ccounc of
I r ! l f f e r enccs i n housenolcl s i z e and dependency r a t i o s , t h e y r e i x p i i c i t l : ; t i n c luded i n t h e pa r ame te r n , t h e a v e r a g e nuaber of " o t h e r 4 o r k e r s " i n
d i i f e r e i i [ household c a t e g o r i e s . 'This p a r a m e t e r , however , s s p e c i f i e d 1
exogenous ly and does n o t v a r y o v e r t i z . e . The n o d e l a c c o u n t s f o r
t h e e c o n o x i c a l l y a c t i v e p o p u l a t i o n and f o r t h e nunber o f hou e h o l d s 1 r a t h e r than f o r t h e t o t a l p o p u l a t i o n .
.U.ipration :Icdel I I I I I ~
I n t h e o v e r a l l c o d e l , n i g r a t i o n i s a s s u r e d t o o c c u r I between I
p e r i o d s and i s t h u s c a l c u l a t e d iri t h e dynamic p a r t . ~ i ~ r a t i o i n i s
v i e v e d a s a d i s e q u i l i b r i u m a d j u s t a e n : p r o c z s s , a r e s p o n s e t o r u r a l -
I
of l a b o r hetveer: r u r a l and urban a r e a s and c a l c u l a t e s z i i g r a t i b n a s
u rban i n c o n e d i f f e r e n t i a l s . T h i s v iew of m i g r a t i o n c o n t r a s t s
I I
t h e movegent o f l a b o r r e q u i r e d t o a c h i e v e t h e e q u i l i b r i u m a l l k c a t i o n . 11
In b o t h a p p r o a c h e s , m i g r a t i o n i s a f u n c t ' - - of e x p e c t e d incom
w i t h
d i f f e r e n t i a l s . I n t e r m s of o u r model , one way t o ::ee t h e d i f I e r e n c e
i s t o n o t e t h a t a Har r i s- Todaro m i g r a t i o n f u n c t i o n would be i y c l u d e d
t h e Har r i s- Todaro a p p r o a c h which d e f i n e s a n e q u i l i b r i u n a l l o c t i o n a
i n tile w i t h i n- p e r i o d s t a t i c model w h i l e a d i s e q u i l i b r i u m a d j u t a e n t I n o d e l i s r e c u r s i v e i n t i m e and f i t s n a t u r a l l y a s a subnode l i d t h e
I
I
In o u r mode l , t h e r e a r e t h r e e r u r a l g roups which a r e I
p o t e n t l a 1 s o u r c e s of m i g r a n t s : l a n d l e s s l a b o r and f a r n e r s i n ( t h e
t u o a n a l l e s t s i z e c a t e g o r i e s . F a r a e r s i n t h e two l a r g e r s i z e ~ ; + t e g o r i e s ~E I I
a r c nssurncd no t t o m i g r a t e . There a r e t h r e e urSan g r o u p s v h i d h a r e
p o t e n t i a l r e c i p i e n t s of n i g r o n t s : a p ? r e n t i c e s , u n s k i l l e d l a b o r and I
s i i L ? c d l a b o r . I n a d d i t i o n , t h e r e i s i z p l i c i t novezen t of a i g ( r a n t s I
i n t o t h e s e l f - e ~ ~ p l o y e d c a t e a o r i e s s i n c c t h e =ode1 i n c l u d e s a d e c h a n i s n I I
f o r aove5er. t by :he s e l f - e q l o y e d . In e f f e c t , t h e r e i s a s e p a l r a t e
I
a,
-b
N
u
d
a,
m~
c
4
0
a U
-4
b
U
(d
L
!-a l
ua
u
r; c:
- U
P
EL
F
ur
::
a d j u s e e d a s a f u n c t i o n of :he i n c o z e d i f f e r e n t i a l s aaong u rban g r o u p s .
Thus ;in u rban g rou? w i t h a r e l a t i v e l y h i g h e r a v e r a g e i n c o z e w i l l ,
r e c e i v e a l a r g e r s h a r e of t h e m i g r a n t s t h a n i t s c u r r e n t p o p h l a t i o n -
s h a r e . I
FTnen ~ i g r a n t s l e a v e t h e i r f a r m s , t h e i r l a n d i s a s $ m e d t o
b e t a k e n o v e r by f a r r i e r s i n t h e t v o l a r g e r f a n s i z e s . hi$ i s done
by a d j u s t i n g t h e l a n d i n p u t which i s i n c l u d e d i n t h e a g r i c u i r l , ; a l
p r o d u c t i o n f u n c t i o n s . The l a n d i s d i s t r i b u t e d t o t h e two la rger Earn I
s i r e s i n p r o p o r t i o n t o t h e i r c u r r e n t l a n d h o l d i n g s . Thus n l g r a t i o n
Ln t h e model changes t h e s i z e s t r u c t u r e of l a n d h o l d i n g s i n t h e
a g r i c u l t u r a l s e c t o r i n f a v o r of l a r g e r f a r m s . S i n c e t h e l a i g e r
f a r m s , e s p e c i a l l y t h e n e x t - t o - l a r g e s t , a r e more e f f i c i e n t t q a n t h e I
s m a l l e r f a r m s , m i g r a t i o n l e a d s t o some e f f i c i e n c y g a i n s i n t h e I
a g r i c u l t u r a l s e c t o r s . I I
Labor F a r c e Growth and C o ~ ~ p o s i t i o n - -
The a g g r e g a t e growth of t h e l a b o r f o r c e i s s p e c i f i l e d I
L . I l
exogenous ly i n t h e x o d e l , f o r t h e b a s e r u n r e p o r t e d be low, ' t h e I
I n g F r e g a t e r a t e s f o r t h e r u r a l and u rban s e c t o r s a r e c o n s t a n t f o r - - I
I
t h c e n t i r e p e r i o d and a r e s e t a t 2 .8 p e r c e n t ' % y e a r f o r t h e b r b a n
- - I groups and 3 . 0 percen: a y e a r f o r t h e r u r a l g o u p s . These r h t e s
? - I
a r e changed i n some of t h e e x p e r i m e n t s . The r a t e s a r e h i g h e r t h a n I
I
t h e r a t e of growth of popula;.:on i n Korea b e c a u s e , due t o a baby
boon i n :he 1 9 5 0 s , i n c r e a s i n g numbers a r e e n t e r i n g t h e l a b o r f o r c e .
V)
aJ c 0
aJ
4V
)c
m
x
-4
U
JJ
aJ a
tu
a~
u
0
7
au
c
bo
o!
v5
,"
a
~
4
c 4 3
a,
5
a, .o
E! a
Jb
G
M
.C
aJ h
4
b
*
3
U
bo
- 4
U
'V
)V
4
m
XU
0
V
aJ 6
C
aJ m
rn
w4
4
va
cm
o
m3
-u
n.
u.
cw
m
a
Jr
gh
C
0
-.-I C
a
4
4x
va
o
3
0
*d
o
.C
U5
Oa
Ja
Jt
u
m
.C 0
Jz b
hu
- - - Q
rl
dn
--
--
~-
w-
-~
--
y
IZ
4
4
a
4%
uu
c
50 3
ao
rc
-d
3g
u
om
-r
(a
om
aJ
3
G
u
mo
w
OU
V)
UO
~~
J~
JW
U
Wb
U
13.
MO
.C
O3
I1
rd
UQ
rd
aJ
7
aJ 4
b
h
x
3
a
v
a, O,
0m
oc
.c
aJ
Oa
J4
s
.c
ao
l-
Ju
g
ru
-r
(U
0
.C
-4 aJ
aJ U
UP
)U
U
LI
M
CV
UV
)
U
rn
bu
bm
o
mr
la
~-
r(
a
c'
~t
u~
~(
oa
oa
,~
4
5:
.C
~0
30
04
4V
D
M
U
rn
U-r
0
rn
0
c
Cb
cd
Cb
4-l
aJ X
C~
~J
O~
~O
n
fC
C.
Cb
00
4U
nf
Ed
O
.C 4
PO
tu
aJ
UO
~
r3
bm
34
-l
aJ
V b
hE
6
ac
ub
uv
ma
~r
:
3
a
I
4-
lu
oC
dm
aJ
O
C4
UU
.-i
aJ m
u4
r
:C
-r
(3
C
'H
.C
V)
aJ
e
,"
u,
2
m
PJ a
4
u-I LI
I
OW
W~
UJ
C~
~
a~
ao
rn
or
uc
g
uc
7m
II)
aJ -
4O
LI
Va
Jl
-J
rd
.C M
X
*
aJ L
Ca
JU
bD
aJ
aJ
.U
C
4
0) U
aJ
3-
4r
d
bS
V)
>a
J
C
bU
bV
)M
c
(l
-J
mM
aJ
+-
4U
a
or
da
m
a~
4a
.c
3
Eu
oa
m
.c
a2
.c
au
o
ov
Jz
M3
u
aJ M
~
JJ
JU
IO
e
hU
(d
3
VI rU
U
aJ
-r
tU
m
~r
:U
aJ
ur
fc
uX
mo
r~
r:
C
Ua
Jd
v
a
,a
J
b
0
0
L.4 4
S m
ud
m
M~
)C
ma
Jm
u
U
rd
ru
c 0
- C
a
mn
lr
du
ce
3
C
0) a
JU
Od
nC
aJ
0,
U
(d 0
E.
55
b
md
:
u*
~E
*c
b~
$
E
0
01 ~
w-
55
~0
o
a
~
oa
u
um
d
mr
~E
br
nC
uI
r:
ov
rd
a
co
0,
3U
Or
dU
hc
U
4
O-
do
no
a1
r:
0~
4
au
?
" 50
ur
~s
c~
iu
uO
.c
~~
~d
hn
~~
c
uo
r:
u(
da
>
~O
W~
L
?!
b-
'J
OJ
U
4
hr
3'
4-
00
U
U
-
m
c)
l-4 2
c
40
ar
ac
d.
+
e
Ua
Jh
In
Ua
J
U
Ud
Cr
,
OU
kO
Q
UC
U
aJ I?
rl
U
uc
,l
er
ru
-4
a1
-
r(
o,
oo
Jz
ba
J
c
-7
d
,Y a,
0
13 u
ua
J~
TL
0,
a
om
v
l~
~
km
Em
o
E
01 Ld
td 9
)3
O,
bO
%C
d+
5n
aU
4.
C
MC
ua
,u
&
>b
r
n.
+(
.~
1~
0
C
-4
.c
33
cw
(
Fc
,w
nc
r(
D
C
LJ
[r 2
.r: I1
'
Ji
b+
-E
f
l.
s"
,0
4,
V
c
r:
uL
-3
4
UU
F-
la
,C
rs
Tr
Wa
,
D a t a , ?!ode1 E s t i m a t i o n , aad V a l i d a t i o n
The d a t a b a s e i x Korea is unusua??y good and p l e n t i f u l .
Thc p r i m a r y d a t a s o u r c e s used I r e : n a t i o n a l a c c c u n t s , a n i n p u t -
o u t p u t t a b l e , a c a p i t a l c o e f f i c i e n t s t a b l e , t h e c e n s u s o f n a n u f a c t u r i ~ ~ ,
n s u r v e y of t h e e c o n o m i c a l l y a c t i v e p o p u l a t i o n , a popu la t [on c e n s u s ,
a s u r v e y of t h e f i n a n c i a l s t a t u s o f f i r n s , and a s p e c i a l h o u s e h o l d
e x p e n d i t u r e s u r v e y which a l s o s p e c i f i e d t h e eaployi?,ent s t h t u s of I
e v e r y h o u s e h o l d menber . A d d i t i o n a l s p e c i a l i z s t i da:a s e t s l e m p l o y e d
a r e : Earn management i n f o r m a t i o n , r e t a i l and w h o l e s a l e t t a d e c e n s u s ,
t a x d a t a , f l o w of f u n d s d a t a , and a w o r l d- p r i c e s u r v e y .
The b u l k o f t h e d a t a work c o n s i s t e d o f r e c q n c i l i n g t h s
i n f o r a n t i o n from v a r i o u s s o u r c e s and y e a r s i n t o a m u t u a l l y con-
s i s t e n t s o c i a l a c c o u n t i n g framework. The p r i n c i p l e f o l l o 4 e d was
t o t i c a l l t h e f l o w s t o t h e i n p u t - o u t p u t t o t a l s f o r 1 9 6 8 , r e c o n c i l e
t h e n w i t h t h e n a t i o n a l a c c o u n t s f o r 1 9 6 8 , and u s e o t h e r scjurces t o
I * b r e a k down t h e r e l e v a n t t o t a l s by f i r 3 s i z e , l a b o r c a t e g o ~ i e s , house -
I
h o l d t y p e s , e t c . h!ost of t h e d a t a r e f e r t o 1 9 6 8 , b u t son4 of t h e
s p e c i a l i z e d s o u r c l s were f o r o t h e r y e a r s ( m o s t l y 1970 o r l s 7 2 j . - I
Yes t of t h e p a r a m e t e r s o f t h e m o d e l i d e r e e s tirra tied f r o n I
he c r o s s - s e c t i o n a l i n f o r i i a t i o n u n d e r l y i n g t h e d a t a b a s e . L ' sua i ly
t h e y v r e r a t i o s o r a v e r a g e s s c a l e d t o y i e l d t h e r e c o n c i l e d t o t a l s .
The ~ a j o r e c o n o n e t r i c e f f o r t y a s i n t h e d e r i v a t i c n of t h e p r i c e a n d
I n c o a e e l a s t i c e s p e a d i t u r e f u n c t i o n s by e a c h of o a r f i f t e e n !:ousehold
ce :egor i - . s 2nd 39 s e c t o r s . ' .A- t tezs t s t o e s t i r n e c e ;he p r c d u c z i c n
- . ,* :,..ctL:r. ;.ars:.rt?rs frcz t L x z ~ t 3 r i e s o r ; T C S S ;:.---s~ 1 2 : ~ ;.z: - - '-I* .:
. .
. - . , . - - -?- 3;"a'- -'- .-... , ... . ~ . . . a o I th.2 ix~) E L e r r t i c 2-c 1 : )dscs i j l e y s s ' . : ~ = s
cstir.a:sZ ? i r e c : l y : roc 1965 f a c t o r s3.zre d z r e , al.2 t e s t e d 5:: f s r s - I
. - z r ens 1z-21 o f disaggregation ( L f i r n s i z e s ~ c d
f a r :he :.cdsl; t:q2 ?roduc~icn f c n c ~ i c n p a r a z e : e r s
I
:as:irg 2x2 c o z ? a r i n g t h e r 2 i u l : i x i r h 1 9 7 0 :-!I i? 7 ~ s :
-
29 s e c t o r s ) r e q u i r e ?
u s e d L - Y ~ E t h ~ r z f o r ~
. . ecancz;.--:.;~:e ~ l a n n i n g :cde1s, t h e z a j o r e f f c r t lay I n
teri7;ir.g a c s n s i s r e n t d a t a b a r e . Cncc t h i s -.;as a~cs : .? l i . sheC i'i
es t i z a t L c n p r o c e s s i t s e l f 742s r e l a t i v e l y e a s y .
-. I 1r.2 n o d e l v a l i d a c s d by c o x p a r i n g :?I a c d e l s o l ! l t i o n s 1 Fsr t i 2 ~ ? Z c g i n o u s v a r i z 5 l i i -it>. ; ; u a l d 2 ~ 2 E s r l C S S , 1970 a : ~ d 19;2
The r e s : : l r s nz ree e:.:tre~.el;: -.%-ell. ? ~ r 1 9 6 8 , 95 ? r c e n t o f ';ke n o r e
t t h a n 3000 e n d o g ~ n o u s v a r i a j l e ; a r e :;ithi11 t:;o p e r er,cage p o i n t s a f
i' L : ~ z c?ct.-a1 s o l u t i o n . ? o r 1970 an2 1973, l e s s c o n ? ? - r i s s n s
ere ; c < s ! b l ? , 5 i n c e l e s s c c z ? l e ; e d a t a s e t s :%,ere n * . r a + - i n b l e for t h e s e
Set-*.e?n 1 9 6 8 and 1 9 7 2 v h i c h i s c o n d i t i o n a l upon t h e p a r t i c u l a r c h o i c e
of z x ? c r t g r o w t h , i x p o r t s u b s t i t u t i o n , l a b o r f o r c e g r o w t h , e x p e c t a t i o n s ,
c r e d i t , t a x a n d t r a d e ? o l i c y r e g i a e s , and m i g r a t i o n f u n c t i o n p a r a z e t e r s .
- 3 a s i c Yode l D p a a i c s
The b a s i c d>-namic r u n w h i c h i s u s e d a s a r e f e r e n c e p o i n t
i n th2 e x p e r i r - e n t s , a s s u m e s c o n t i n u a t i o n of t h e Korean outwaqd-
l o o k i n g s t r a t e g y af e x p o r t o r i e n t e d , l a b o u r - i n t e n s i v e i n d u s t d i a l i z a t i o n
and g r o w t h . The mode l r e p r o d u c e s t h e a c t u a l d i p t h e Korean q c o n o ~ y
u n d e r w e n t i n t h e p e r i c a I970 t o 1 9 7 2 . I n t h e l a t t e r p e r i o d s * t h e
economy t u r n s a r o u n d : t h e r a t e o f i n f l a t i o n d e c l i n e s , t h e b a l a n c e I
o f p a y n e n t a i m p r o v e s a d : ! e g r o w t h r a t e o f GDP g r a d u a l l y i n ~ r e a s e s .
I n c o n t r a s t :o t h e i m p r o v i n g a g g r e g a t e economic p e ? f o r m a n c e , I
I t h e d e c i l e d i s t r i b u t i o n o f r e a l h o u s e h o l d income d e t e r i o r a t e s ; t h r o u g h
I I
i t i n e i n t h e b a s i c r u n st a s l o w b u t s t e a d y r a t e . The d e t e r i o ~ r a ~ i o n I I
i n d i s t r i b u t i o n l e a d s t o a s u b s t a n t i a l l y l o w e r r a t e of g r o w t d o f
a b s o l u t e incomes ir , t h e i o w e s t qu . ' . n t i l e t h a n i n t h e u p p e r d e c l i l e . i i Thus t h e r i c h g a i n over-ihelmingly more t h a n t h e ppor f rom h i g ~ h a v e r a g e , * 1 i growth r a t e s , b o t h r e l a t i v e l y and a b s o l u t e l y . Even s o , t h e r ' i s e i n i I
I t t h o a b s o l u t e incomes o f t h e poores tZ q u i n t i l e l e a d s t o a d ra ina : t i c r e d u c t i o n
' i ri
i n t h e p e r c e n t a g e of h c u s e h o l d s w i t h i n c o n e s be low a f i x e d a b k o l u t e c. - - L p o v e r t y l e v e l i n l a r g e p a r t d u e t o T h e d e c l i n e i;l t h e a g r i c u l i t u r a l I
: e r a s o f t r a d e a f t e r i z p o r t s u b s t i t u t i o n p o s s i b i l i t i e s i n g r a t n s a r e
e x h a u s t e d . T h i s d e c l i n e i s due a l a o s t e n t i r e l y t c c h a n g e s i n t h e
s t r u c t u r e o f demand. As c a n b e s e e n froin T a b l e 2 , t h e s h a r e o f
. . sg::c-~i:crc i n t a ; a l ou:?u: iz :5e j a s i c r u ~ d e c l i z e s ove r ~ 5 x 2 . I -. . - . . .ne i z r z n c ; o r a z r : c $ ~ ~ : x r a l s n z d ~ c 1 2 3 r l ; ~ d2cl:-ss ev22 a s r s r , f I
, . - . ei;c~ti~!;y f a r i h r e e r e a s o n s . :::E:, :he i - c c r e e las : i{ iEy o f
I i2--- ..c2.,d f c r a ~ r i c u l : l ~ r t ; ~ o o d s I s fui:z s ~ a l l f o r ; r i - * u a l ;. 211
m.
- - i t h 2 ~ r c z ? s , : n u s , as i x c o z s s r i s e , :3s dezazd f o r z g r i c
I
s n , ? ~ ? (and I n c c z e 2lzs:FcL:y) 13 I c v e r . I5iri, z f a r + : < ~ - a-t c;-
--.- . . ,>d ing of s k i l i s zoVJes p e o 7 l s ox: o f g r o u z s z i t i ~ r e l a r i - ~
I- cc : ? sxzp t i on s h a r e s o f , a f l l izcozie e l a s t i c i t i e s o f dezand k o r ,
3 g r i c u l t u r a l goods and i n t o g r c c ? s vi:k l o x e r s h z r e s and e3a-a d I
e: .asr:c: t les. As a r e s u l t , a i r e r :he t a r n s of t r a d e s t2r t d e c l i n i x ~ , I
r u r a l i n c o a e s r i s e l e s s r a p i 1 1 ; ~ t h a t crSz~. i z c o r e s z n d , by ct2 e2C
~ o f t i e p e r i o d , t h e c ~ i e r * h e i n i n g n a j o r i t ; ; of t t e poor a r e . 2gric:l:xr2
I
a:;d :i,c a a j o r i i y of r s r a i househo ld s a r e ?tor.
Thus , :he o - ~ e r s l l ? e r foz , a : ce oE econoxy i s - ' Y ...,.. 2 . C;: C , I
i n e x p e r i x e n t s 1 and 2 , T--e v z i i e d he n i g r a t i o n e l a
. - i n o r d e r t o e x p l o r e t h e 3::3c:s of diffsrent r a t e s and degree
r e s p o n s i v e n e s s of s i 3 r a : i c n c;r. che z c o ~ o a y . I n e x s r r i s e n t 1, t h e I
s i g r a t l c n e l a s t i c i t y v a s s e t t o z e r o t h u s e l i x i n a i i 2 g a l l r u r j l - I
urban m i g r a t i o n . In e q e r i x z n t 2 , t h e e l a s t i c i t y rras doubled : r o o
t h e b a s i c run (0 .30 c o a ? a r e l t o 0 . 1 5 ) . The r e s u l t s a r e p r e s e d t e d
i n Ta 'J les 1 t ) 3.
R e s u l t s I ~
X i g r a t i o n h a s se*:eral e f f e c t s on p r c d u c t l c n p a t t e r n s ~ , dexand I I
p a t t e r n s and p r i c e s . i n ?reduction, i t adds t o urbax s u p p l i e d and sub- I
t r a c t s from i u r ; , l ones t he reby s h i f t i n g t h e c e r r s of t r a d e i n f a v o r I
@ of f a r z e r s sin,ce ~ g r i c u 1 : u r a l goods becone r e l a t i v e l y
On t h e denand s l d e , a ig ra : l cn tra:.sforzs r u r a l
ones t h e r e b y r educ ing the r e l a t i v e dexa:d f o r
s i z i e urban c c c s u r e r s ha-re i c v e r icccme d z s t i c i t i e s of deczzd i o r
E I a g r i c u l t u r a l goods axd a l s o s ~ e n d a l o v e r ~ s h a r e of t :?eir izcod,e on
I I
t h e z . The change i n re la t i - :e d e ~ z n d I c e t o - ' - - a b ' ,..-,& --on *..-ill t h J s ,.,-,~r:-: I
I o f t r r l d e . The u l c i ; ; . ~ : ~ ir .zac: o f x i g r a r t s ~ . 2: :he : e r ~ . s cf t ? z t e
- . I d e p e n d s 02 t h e r e l a t i v e =g:.it.;des o: tze :--.a e i f e c z i . C u r
0 h N ClO 0 -1 C J o\ 4 4 4 4 -4
U r J L i U 4 Q 2- ' i 2 Ld
U 2 L O - d V ) c r 3 L U - c to COU U < L O 6
C, 0
" 2 ," C O O L a 3t CJ 5 U L >
0 C as-,! a2 a - V: O c l U - 3 I -
- - c x ~ e r i z e n t s i a g e n e r a l i n l l c a : a :>a= t h s p r c d u c t i c n e z r e c : ? re -
d o a i n n t e s a c d t h 3 t t h z r e f ~ r ~ ~ 1 1 3 r z : i ~ a t s n d s t o r a i s e t h s a g r i c I
r.;ll ::lr;ll terns u f t r a d e 2-6 r z r a l i ~ c a c e s .
I n g e n e r a l , t>.2 r23ui:s ~f L-hs f i r s : :--.o e x 7 e r i z e i i c s
n e a t l y k r a c k e t t h e r e s u l t s f r o n t h e b a s i c r u n . The ' n i g h e r t h e
n i g r a t i o c r a t e t h e h i g h s r i s a g g r e 3 a t a o u t ? u t axd n a t i o ~ - a l inc z e , 1 T h c i n c ~ e tifferential 5e:xeen u r 5 a n ~ c r k e r s ( t h e c a t e g o r i e s r e
a p p r e n t i c e s , s k i l l e d x o r k e r s and u z s k i l l e d z c r k s r s ) and t h e 70 r e r
r u r a l g r o u F s ( l a n d l e s s l a b o r and f a r x e r s i n t h e t v o s n a l l e s i f rx I s i z e s ) n n r r o v s s u b s t a n t F z I L j - a s :he n i g r a t i o n r a t e i n c r e a s e s .
H i g h e r fara at ion r a t s s a l s o 1;ad t o i n ? r o v e z e x t s i n t h e d i s t r i u t i o n
of i n c o n e and t o r e d u c t t o z s I n t h e e x t e n t o f p o v e r t y . b i n t h e n e a r t e r x -- w i t h i n f i v e y e a r s -- v a r i a t i o n s n i
n i g r a t i o n h a v e l i t t l e e f f e c t on t h e d i s ~ r i b u t i o n o f izccze o r
:he l e v e l o f p o v e r t y . ib .e s h a r e o f h o u s e h o l d s below i h e ? o v e r
l i n e i n y e a r 5 i s w i t h i n a p e r c e n t a g e p o i n t of t h e b a s i c r u n v
f o r bot!i e x ? ? r ! ~ , e n t s . T h e re!a:ive d i s t r i b u t i o n s a r e
i d e a t i c a i a n d t h e 0 7 / e r a l : , ea r , i n c o x e s d i f f e r ,+OZ t h e & s i c
b v 1 ~ 4 s t h ~ n 1 p e r c e n t . S e c a u s ~ t h e r e s u l t s a r e q u a l i t a ~ i v e l ; ~ ~
s i a i l a r , v e have n o t r e F c r t e d :he f i g u r e s f g r i n t e r - e d i a t e yea s C
u i t h GO ::,!;ration, : he r u r a l ? ? c r a c c o c n t f c r 6C ;erce:.: o i r::f I
i n T a b l e s 2 a n d 3 . - B I
The major e f f e c ~ cf z i g r a t i o a i n :he n e a r :erx is 3n
- I h e urSan to r u r a l i n c c r , e i F f f e r o - " - ' -..i-;l- ( - 3 - ' -&3a;: ' . . -or~ers : 3 3 c c r e
- - r I
t h e
I r , c i d e n c e cf 7 o v e r : y acd : :ye -,.- LU-al-crbzn inca-2 ga?. - :or es.z:.$le, I
r u r n i g r c u p s ) r a z z e s f r o a 180 p e r c e n t w i t h no z l g r a t i o n t o 109
~ e r c e n t x i t h h i 2 5 x i p r a t i c n i2 y e a r 5 . T h e r e i s a l s o son!e e f f e c t I
nn a g g r e g a t e gro--- t :~. 3 y y e a r 5 , t h e r e i s a 2 . 8 p e r c e n t d k f f e r e n c e I
i s a g r i c u l t u r a l o u t p l i t b e t v e e n t h e h i g h and z e r o n i g r a t i o b e : ipe r i - I
z e n t s . n v t r a l l p r o d u c t i o n , h o x e v e r , is 2 . 2 p e r c e n t h i g h e i n t h e t , I ! .,;: - , i GI-,,: i o 1 1 L,.-::. !. i ! : : ~ [ ? t , ::?r!ic:,at i:;:; C!I<I: :!I? x i c r a n t s c3-1-
I
( i t s : r i b u r i o n and on ? o v e r t ) . . The s i i a r e of t h e b o ~ : o a 20 d c r c e n r , I
' u r c x : ~ r ? p l e , is zuci l h i g h e r ~ i i t h h i g h m i g r a t i o n t h a n . i i t i ino I
!I;( s r . 1 ~ l c n ( 5 . 0 parcen: compared t o 1 . 2 p e r c e n t ) . The G i n i ( c v -
~ l i i c i c n t i s 2 o n s i d e r a b l y l o b e r -- 0 . 4 5 7 compared t o 0.5981 The 1. I
nee:^ income o f t h e p o o r e s t 20 p e r c e n t of t h e h o u s e h o l d s i s ( abou; 3 . 5 I
t i n e s ! ~ i g h c : i n t h e h i g h n i g r a t i o n e x p e r i m e n t (101 t h o u s a n h won
~ : l ~ c r l innd, t!le t o p q u i n t l l e i s c o n s i d e r a b l y b e t t e r o f f w i . 1 I
conp;lrcd t o 30 w i t h no m i g r a t i o n and 95 i n t h e b a s i c r u n ) .
I
n i x r a t i o n (ne.in i n c o a e of 1A99 t h o u s a n d w o n compared t o 1095 w i t h
On t h e
I
i i r n ) The o v e r a l l mean h o u s e i ~ o l d i n c o o e i s h i g d e r u i t h - 1111 m l ~ r a t i o n .
13 w
C * On t h e v h u l ~ , i n t h c s c e : t p c r i a e n t s , r u r a i - u r b a n d i g r a t i o n e - I
I i - . hc. r~cl f ic i , i l t o t!lc poor a;ld d e t r i z e n t a l t o t h e r i c l l . I t i : , ~ r c - i t . s
t!:lz d f s t r i b u t i o n ci i n c o x e , i n c r e a s e s overall prodcct:vi :y i n thd
cJco:ic:?:;, a n d r c d u r e s p t > v e r t y . I n g e n e r a l , o u r r e s u l t s a r e ccns i s t e r : :
w i t h e c o n o n i c t h e o r y and s u g g e s t t h a t s o l o c g a s t h e r e a r e s i g n i -
I i c < l n t r u r a l - u r b a n i n c c z e d i f f e r e n t i a l s , n i g r a t i c n 7;iil lz;kcve I I
F-k ,.,,, ..- :he a i ; r an : s a r e . i- E a c r , ~ e z l t t e d t o f i n d en? layc len t iz :he
I . . u r j a , I j S c r f c r c e . I n c u r r i o c e ~ , t 5 s r e a r e c o i n s r i ~ u t i c z a l 1
i j a r r i e r s s u c h as r i z i i n ~ t 3 ;re7;esL xiar+n:s frsx f i . ~ d i . r / ~ I
ez??oyzer. : ar.d, i n a d d i t i o n , :hey a r e a s s w e d t o 'nave t h e si;jisw
e5uca:ion and s k i l l s t e q u i r e d of c r b a n l a b o r . I
~ ~ 3 a l a n c e d Labor Grcw4th
- D e s c r i p t i o n o f t h e t m e r i z e n t s
I n e x p e r i x e n t s 3 and 4 , t h e r a t e o f g rowth o f t h e 4 a b o r I
I
f o r c e *;as changed c x i f c m l y a c r c s s t h e r u r a l ar,d urbar , s e c t o q s . I n
e x p e r i z e n t 3 , b o t h t h e r u r a l a z d u r t a n a g g r e g a t e g r w r h r a c e s o f
l a b o r were lowered by I p e r c e n t a g e p o i n t . I n e x p e r i z e n t 4 , hey ii = e r e 5 0 t h r a i s e d by 1 7 e r c e n t a g e p o i n t . The a a g r e g a t e grov:d r a c e r
i n t h e b a s i c run a r e 2 . 8 p e r c e n t a y e a r f o r u rban l a b o r and
I p e r c e n t a y e a r f o r r u r z l l a b o r . I
I
These e n ? ~ r i x e z : s rc j rase r . : r a t h e r 2ra:ntic chanacd i n '2 ~
t h e g r o v r h r i t e of :he l a j o r f o r c e . 3j. y e a r 9 , t h e : o t a l l n b o r - I *
I
f o r c e d i f f e r s b;i 1 , e n i l l i c n p e o ? l e b e i v e a n :'ze :~ .o axperi:e{:s,
d ~ r c ... z r c n c e , - , i ici ie?resc- : s , - :er:e-: o f -he j a s i c r u n l a ' t o r
: * Y - L u , L e i n y.:a: 9 . Si,-ize :hest. c:?anses appl;: t o ::?e ' ,alu, .L-- '--* - k r + S ,
I . # :',:e:~ s h o u l d b e :n:crTre:ed as res5L::r-g f r z r . d e z o g r a s ; h i c c:-.aA~es I
I - 7 m n . , LIP t o n zeneraiisn e a r l i e r . ...-, . ;ere c h c s e n t o pril.;idc- 2~ :4Lde I
I
I
1iai ;s t o e f f e c t s f r o 3 - , r e a o d e r a t e c h a n g e s i n t h e s a n e d i r e c t i o n s .
:Is i n t h e x i g r a t i o n e x p e r i m e n t s , t h e r e s u l t s f n g e n e r a l
b r acke t ; t h o s e fro: t h e b a s i c r u n . The r e s u l t s a f t e r 5 1 - e a r s -re I
Yery c l o s e t3 e a c h o t h e r and a r e a l l i n t h e s a n e d i r e c t b o n s a s t h e I I
l o n g e r r u n r e s u l t s . T h e r e f o r e , we w i l l d i s c u s s o n l y t h k r e s u l t s f o r
I
t h e l a s t y e a r . I I
I
Given v ? r y d i f f e r e n t f a c t o r p r o p o r t i o n s and t h c h n o l o g y i n I
n g r i c u l t u r n l a n d n o n - a g r i c u l t u r a l s e c t o r s , b a l a n c e d l a b r f o r c e i g r u x t h w i l i , i n g e n e r a l , c a u s e s h i f t s i n t h e s t r u c t u r e f p r o d u c t i o n . i K u r n i - u r b a n m i g r a t i o n a n d t h e i n v e s t m e n t model p r o v i d e g e c h a n i s m s
I
For q u a n t i t y a d j u s t m e n t s by f a c t o r s o f p r o d u c t i o n t o c h i n g e s i n 1
p r o d u c t i o n s t r u c t u r e , b u t o n e e x p e c t s p r i c e a n d wage a d j l u s t m e n t s I
as w e l l . 3 0 t h q u a n t i t y a n d p r i c e a d j u s t m e n t s a r e e v i d e t i n t h e n I
r e s u l t s . I I
X i t h h i g h l a b o r g r o w t h ( e x p e r i m e n t 4 ) , t h e ~ u t ~ ~ u t o f b o t h I
t h e a g r i c u l t u r a l a n d n o n - a g r i c u l t u r a l s e c t o r s is h i g h e r . T h e r e is I I
nn a D p a r e n t e l a s t i c i t y o f 0 .2 f o r a g g r e g a t e o u t p u t growtih w i t h
I respec; . t o l a b o r f o r c e g rowth a n d a n e l a s t i c i t y c f ' 0 . ' 6 flor t h e
. ~ g r i c u l t u r a l s e c t o r s . H i g h e r r a t e s of l a b o r f o r c e g r o w t i n c r e a s e - P
d e n a n d . The i n c r e a s e i n t h e s h a r e o f g r i c u l t u r e i n demknd, h o w e v e r , e l
I
1 s f a r g r e a t e r t h a n t h e i n c r e n s ~ i n the ' share o f p r o d u c t l o n , I
r c s l j l t l n g i n n d r a - a t i c i n p r o v c ~ e n t i n t h e a g r i c u l t u r a l t e r z s o f
- t h e s h s r c o f a g r i c u l t u r e b o t h i n t o t a l . g r o d u c t i o n a n d
i
t r . ? d e . I n y e a r 9 , t h e t e r m s o f t r a d e a r e 1 0 0 f o r t h e h i g h g r o ~ ~ ' i 1
c x p e r i n e n t c o n p a r e d t o JO f o r t h e l ow grcw:!~ o n e a n d 53 f o r the
0.1s i c r u n . I
I I I I
1 I
t o t a l c o n s m p t ? o n
d e s a c d a l s o
r e f l e c t d i f f e r e n c e s $ 3 z . i 3 r a t i o n r a t e s b e t v e e n t h e t - ~ c e q e r i z e n t s .
The l cu z r c v t h e l c , e r i z ~ r . : i n d u c e d z c c h z c r e a i g r a t i c n t h r ~ t h e
- e n t i r e p e r i o d . ;he h i j k e r s i g r a t i o n v i t h l o w e r p o p u l a t i o n $ r o v t h
v a s d u e :o "pus:?" f a c t o r s ; n a z e l y , a x i d e ~ ~ i n g gaT be tveer . rhral
and u r b i n 5 a c o ~ e s . T>is i n c r e a s e 2 x i g r a t i c a v a s n o t , h o v e v e r , I
enough L O o f f s e : t h e d e c l i n i n ~ t e r m of t r a d e i n t h e I c v g r
e v e r i a e n t . 3y yea; 9 , :he u r b a n - r u r a l i n c o z e r a t i o i s 356
:he l o v g r c v r h e ~ e r i z e x t c o c ? a r e d t o 1 4 4 f o r e x ~ e r i z e n t 4
f o r t h e b a s i c r u n . The r a p i d d e c l i n e i~ t h e t e n s o f t r a d e c a u s e s I
a g r i c u l t u r a l inco-,es t o f a l l f a ~ t e r t h z n can b e o f f s e : by n _ i g r a t i o n . I
I
I n t h e h i g h g r o v t h e q c r i m e n t , t h e r e i s l e s s n i g r a t i o n b e c a j s e I
r u r a l i n c o c e s r i s e s u b s t a n t i a l l y . ~ I n t e r z s o f :he r e l a t i v e income d i s t r i b u t i o n , zor i / r a p i d
l a b o r 3 r a w t h l e a d s t o a = o r e e q u a l d i s t r i b u t i o n . The G i n i 4 o e f f i c i e n t s
a r e 0 . L 5 3 , 0 . 4 7 5 and 0 . 2 4 0 f c r t h e h i g h g r o v t h , b a s i c r u q a * l s l o w I I
g r o v t h e x p e r i ~ e n i s r e s ? e c L i 9 i e l j . . I n b e r m of : e m i x c o c e s , h i a h I
3rowth i s b e t : e r f o r t h e p o o r e s t q u i n r i i e t'aar, l o v g r c v t h 2.' d t C -
f o r t h e r i c h e s t q u i z t i l e . However, z c d e r a t e l a b o r f o r c e E r v t n a s .; C
I r e p r e s e n t e d i n t h e b a f i c r u n y i e l d s t h e s=e z e a n i n c ~ c e o f t h e - -
E I *
m p o o r e s t q u i z t i l e a s inw t h e h i p 5 gro1it:7 e q e r i z e n t and a i s o ;Pielcis I
h i g h e r ,can :nce;-,e f o r t h e r i c h e s : q u i z : i l e a z d f o r :he o v e t a l l
a v e r f l q e , T h u s , i n :er:s sf t 3 e ? z r c t a c r i ~ e t i o n , = c d e r a t ~ grr--:h i~
- - ~ r c f e r r e d t e h i g h later g r c z c h . :: one has s g a l i : a r i ; n v ; l$es , =oders:e
. , q u f z t i i e and y F 2 L d s :?e l e a s c 3vers,, ?over:? cf :he ::-,rze x;+?rl=e;.:3. 4 I
I
Cnbalanced Labor Growth
I n e x p e r i z e a t s 5 and 6 , t h e a g g r e g a t e r a t e of growth o f t h e l a b o r
f o r c e i s l o v e r e d uneven ly . I n e q e r i a e n t 5 , t h e r a t e of g rowth of
t h e a g r i c u l t u r a l l a b o r f o r c e i s lowered by 1 p e r c e n t a g e p o i n t , w i t h
:he urban g rowth r a t e unchanged. I n e x p e r i x e n t 6 , t h e urban growth
r a t e i s lowered by 1 p e r c e n t a g e p o i n t i n s t e a d . The growth r a t e s i n
t h e b a s i c run a r e 2 .8 and 3.0 p e r c e n t a yaar f o r urban and r u r a l
l a b o r r e s p e c t i v e l y .
x€2sul ts ----
The un5a lanced p o y u l a t i o n e x p e r i x e n t s i n d i c a t e t h a t p o p u l a t i o n
Llrnit ,2tion i s a lways t o t h e a d v a n t a g e of t h e s e g a e n t of s o c i e t y
p r a c t i c i n g t h a t l i m i t a t i o n , and t o t h e d e t r i n e n t of o t h e r s e c t o r s .
Tt,e r e a s o n i s t h a t t h e t e r n s of t r a d e s h i f t i n f a v o r of t h ? s e c t o r
xtiose l a b o r f o r c e f a l l s r e l a t i v e l y . The s e c t o r whose l a b o r f o r c e
c l r o p s p roduces l e s s , t h e r e b y r a i s i n g t h e r e l a t i v e p r i c e s of i t s p r o d u c t s
a i ~ d , u l t i m a t e l y , r a i s i n g i t s income. T h i s l a s t r e s u l t *depends cn :k.e
c n ~ p l r i c c l l Fact t h a t t h e r e d u c t i o n i n t h e l a j o r f o r c e of a s e c t o r
r e d u c e s t h e s u p p l y of t h e s e c t o r ' s o u t p u t n o r e t h a n i t . r e d u c e s d e m n d
f o r i t s o u t p u t . I:I ;!ear 9 , t h e a g r i c u l t u r a l t e x s of t r a d e a r e 35 ir. w
clxperfment 5 conpared t o 49 i n exper imeht 6 and 83 i n t h e b a s i c r u n .
Keduc t i2n i n r u r a l l a b o r f o r c e grokyth ( e x p e r i n e n t 5 ) r a i s e s
r r i r a l i c c o n e s i n y e a r 9 by 9 p e r c e n t o v e r t h e i r b a s i c run v a l u e s and
r e d r ~ c c s t h e r u r a l s h a r e i n t h e p o v e r t y p o p u l a t i c n s l i g h t l y (5y 2 . 3
7 e r c e n t a g e p o i n t s ) . I t a l s o r e d u c e s o v e r a l l p o v e r t y and r a i s e s ~ h e
,,,,,.,. q u i ~ . t i l e . I: r e d u c e s u r b a n 7over:jt as Zen: f z c c z e o f thi? '-1"-
. . ~*e;: ~ 2 ~ 3 ~ 5 2 :: s s S s t ~ ~ . r i 3 1 1 y r e d c c e s oq.7erall z i z r a t i o n -- 3 t o t a l
a f i 6 C t h o u s s n ? z i g r a t e c o z 7 a r e d t o 632 t h o u s z n l i n t h e b a d i c r u n
and 9 2 1 :>,sosand i 2 e - e r i z e n : 6 . I
X e d u c t i c n i n u rban i a b o r f o r c e g r s w t h ( e q e r i z e n d 6 ) has I
I
t h e S ? ~ O S L : ~ e f f ~ c : z n t is - o r e e x t r e a e i n i t s i z ? a c t . I t r a i s e s
u r 5 a n i n c o z e s by a3ou: 3 0 F e r c e a t c = z ? a r z d t o t h e b a s i c rud a d I
r e d u c e s r u r a l i z c o z e s by a l a o s c 4 0 F e r c e n t . It a l s o r s s u i r l s ir~ I I
i n c r e a s e d : c t a l ? o v s r z y and l o v e r s :he i n c o n e of t h e bot:cd q u i n t i l e . I I
I n 5 c t h e x ? e r i z c n t s , lar ration t e n d e d t o o f f s e t t5e i z p a c t o f t h e I
u z 5 a l a c c e d change i n l a 3 o r f o r c ? g r c w t 5 . Y A g r a t i o n was c o r ~ e
e f f e c t i v e i z e x ~ e r i ~ e n : 5 , r e d u c i n g t h e u r b a n- r u r a l i n c o c e r a t i o I
s l i g h t l y c c c p a r e d t o t h e b a s i c r u 3 a n d g r e a 5 l y c o q a r e d t o e.qerFzerAt I
6 (175 c o n p a r e d t o 1 7 9 and 3 6 9 ) . The a i g r a t i o n i n e q e r i z e ~ n t 6 i s I
v e r y h i g h , almos: as h i g h as i n t h e h i g h m i g r a t i o n experi :ekt , b u t
I
i: s t i l l d i d n o t s u f f i c e t o o f f s e t :he e f f e c t s o f t h e l o v e r ~ e d u r b a n
l a b o r f o r c e g r o v c t h . I
I I I
The :-GO e x ? s r i z e n t s h a v e o n l y l i t t l e e f f e c t on c - r l e ra l l
I e c o n c x i c 2erforzance. Cozpared ts t h e S a s i c r u n , n a t i o n a l i n c o z e - - I
.. l
and g r a s s o u t ? u t a r e b c t b s l i g h t l y h i g h e r i n e x p e r i - e n t 5 a b l l c v e r
t o L p e r c e n : b y y e a r 9 . T h e r e a r e a i s o s m l l c h t n g e s i a thk I
structure cl e g g r e g a t e c o n s u z ? t i c n and c c c h
d i s t r i3u: i -n o f nacio~al i n c o c e ( r e f l e c t i n g
l a r g e r changss i n = h e
I n t e r n s of t h 2 d i s t r i b u t i o n of i n c o ~ e , e x ~ e r i a e n t 5 i s
auch c l o s e r t o t h e b a s i c run t h a n i s ex?erii?,ent 6 . The r e a s o n i s I
t h a t i n e x p e r i m e n t 5 , n i q r a t i o n i s a zoi-4 effective q u a n t i t y a d j u s r -
c e n t r e c h a n i s x and s u c c e s s f u l l y o f f s e t s a o s t of f h e e f f e c t s of tSc I
u-balanced l a b o r f o r c e g rowth . I n e x p e r i m e n t 6, / e v e n v e r y l a r g r c o u n t e r a c t I
n i g r a t i o n does n o t s u f f i c e t o / t h e d e t e r i o r a d i n g t e n s cf t r a d e . I
c: 0
-7 1
U
w 3
.c fl
I-' -r I 18 J
J
I-I 0
L I U
a, rn
.I a)
LJ
J
nt U
I-I M
Our l z h r f o r c e g rowth e x p e r i ~ e n t s c c x 5 i n e p o p u l a t i o a
cf f e c t s ~ i t h t h e i r i z d u c e d d g r a t i o n r e s p o n s e s . ! J h i l e g x t r e z e Fa
n a g n i t u d e , t h e y cezd t o b r a c k e t t h e r e s u l t s one n i g h t e*pect f r o n
c n p t r i c a l l y more l i k e l y e x p e r i z i e n t s i n t h e sarce d i r e c t i s n s . The
e x p e r i z e n t s i n d i c a t e t h a t i f one h a s m o d e r a ~ e l y e g a l i t a d i a n v a l c e s ,
t h e n o n e x o u i d p r c f e r a modera te r a t e of l a b o r f o r c e grolwth o v e r
b o t h s u c h s l o w e r and xuch f a s t e r r a t e s . I n g e n e r a l , h i lgher r a t e s
o f l a b o r f o r c e g r o v t h t end t o f q v o r t h e poor and ;rake t h e d i s t r i -
b u t i o n of i n c o n e a o r e equ:l -- a r e s u l t t h a t a u s t be s e t a g a i n s t t h e I
u s u a l a rguments n a d e f o r s l o w e r p o p u l a t i o n growth.
S i n c e o u r p o p u l a t i o n e x p e r i m e n t s a r e ex t reme i h magni tude ,
t h e y o v e r s t a t e t h e e f f e c t s o n e c o u l d e x p e c t i n t h e r e a l G o r l d f rom
p o p u l a t i o n p o l i c y . The f a v o r a b l e n e d i m run e f f e c t s fouird f o r n o d e r a t e I
r a t e s of l a b o r f o r c e g rowth i n t h e model a r e t h e r e s u l t {f h a v i n g I
removed o n l y one of t h e a n i t - n a t a l i s t b i a s e s b u i l t i n t o niost e c o n o n i c -
demographic models : :hat a g g r e g a t e d e m n d i s i n d e p e n d e n t of t h e
r a t e of p o p u l a t i o n g rowth . S i n c e t h e demographic t y a n s i t ; i o n is I I
L i k e l y t o s t a r t irr u rban a r e a s , t h e arguments f o r coderat ie r a t e s
o f Labor f o r c e growth a r e r e i n f o r c e d by c o n s i d e r i n g t h e r L s u l r s of
t h e c x p e r i z e n t s l i x i t i n g t h e r a t e o < g r o v t h of t h e urban habor f o r c e . I
L l n i t a t i o n s on r u r a l - u r b a n n i g r a t i o R o r o t h e r l i m i t s :o t h e g r o w t h
of the rirban p o p u l a t i o n a l o n e t e n d t o i n c r e a s e o v e r a l i poker:p
( p a r t l y by i n c r e a s i n g r u r a l p o v e r t y ) and t o make t h e o v e r a l l d i s ~ r i -
b u t i o n c o r e u n e q u a l , e- en i n t h e n e d i u a t e r n .
v e r s i o x x e d k e r e is ts a d a ? c a c i c x o f t h e =ole: c s e d :A 45.2 bcok I
vi:h a cuxber cf = i n o r ~ c d i f i ~ a t i c ~ s a-d a -o r2 s o p h i s t i ~ a r s d zc ie l
2 . For a l e s c r ? ? r i o n of L??! and ? : : I , see Q~iz i l ( 1 9 7 5 ) . hi( T Z C O I
z o d e l s a r e s u r v e y 2 6 ix 3rs--3 (1974) and 3.i.CXLY i s d s s c r i q e d iz ~ R c d g e r s , Ec?Xir.s and ;;Sr:.r ( 1 9 7 7 ) . O r h e r e x a q l e s a r e ~ i J o n (1976) 1 a n d . o f C O Z ~ S ~ , Cse le 2x6 A O O - ~ e r (1958) . 1
I I
I
3 . For a d i s c u s s i o n o f szze o f t 5 e e z i ? i r i c a i v o r k , s e e S i ~ o n ( 1 9 7 6 ) . I I
4 . S e e S . K u z n e t s ( 1 9 6 6 ) . I
I I I I I
5 . S e e , f o r e x a n p l e , .A. ?. i h i r l u a l l (1972) and A d e l m a ( 1 9 6 3 ) . I I
See S i ~ ~ o n ( 1 9 7 5 ) . I I I
I I
I
Tor a d i s c u s s i o n o f :his g e n e r a i a ~ ~ r o a c h t o d;;nanic z o d e l s , I
especialiy l o z g r u n r .ocie?~, see X o 5 i n s c c ( 1 9 7 6 a ) . I i I
I
- : ,.: a c g z p l e t e d e s c r i g c i o r , of t h e t e c h n i q u e , s e e 3 o b i n s o n ( 1 9 7 6 5 ) .
I
I
The a l q o r i t h a u s u a l l y r e q n i r e d f i 0 3 1 0 t o 20 p r i c e i t e r a t k ~ n s ' a r ~ d B
f rom 1 5 t o 25 vage i t e r a t i c a s ?e r ? r i c e i : e r e ; i o n . For a f u l l 1 "
d e s c r i p t i o n of o u r s o i c t i c n s:ra;egy r n l a scr-:ey of a t h e ?
a ? ? ~ o a c h c s , s e e Li.delzan as2 3.c5inson ( 1 9 7 7 ) .
LO. '.de o b t a i n e d t h i s d a t a by Zeacs of a s p e c i a l s u r v e y appendzd
t o t h e Korean u r j a n household s u r v e y . Th2 s p e c i a l s l r v e Y Y ~ S
f i n a n c e d by t5e Zo r ld 3ank.
11. H a r r i s and Todaro (1970) .
I
2 . Ahxed (1974) hzs e s t i n a t e d a ~ d s o l v e d a CGE n o d e l f o i 3angl.adesh
i n c o r p o r a t i n g a Kar r i s -Todaro n i g r a t i o n model.
1 3 . Yean household ixcome i s h i g h e r , b u t n a i i o n a l income i s l o v e r
i s l o v e r 11 e q e r i a e n t 1 and t h e r e a r e d i f f e r e n c e s i n u n d i s t r i -
The d i f f e r e n c e i s d u e t o t h e f a c t t h a t t h e number of
bu ted p r o f i t s , government s a v i n g s , and t h e b a l a n c e o f i n ' e r n a t i o n a l I
h ouseho ld s
t r a d e .
; ; lccre 3 i s : r i i u t i a ; ; ?31L;:: iz 2ee.~elc?i .?g C c c ; ~ : r i e s : X Case S : c l y
of K o r e a . S t z n f o r d : S: tn ford U n i - ~ e r s i ~ : J P ress (forthco3iZ3 1 9 7 7 ) .
-.
I
1
{I Case S : : : d y of India's 3 r o s p e c t s . P r i i ~ c e t o n : P r i n c e t o r . Uxi
Cel lern1 Zlec:r:c C o q a n : ~ - T E I P O ( 1 9 7 4 ) .
C o a l e , 4 . J . and Z.U. Hoo-/er
P03uIation G r e h l h and E c o a o z i c C e v e l o ? m e n t i a Low Incocc - .-
P r e s s ( 1 9 5 3 ) .
C a u n t r i e s : -
H a r r i s , 5 . 3 . a n d X.?. T o d a r o - - , . .s " X i g r a c i c n , Lner; . ,?loy'zex~ axb r)evcio?r,ex: : X T;-o-Ser to r .LA:al:;
" i n c o r , ~ D i s i r i h u t i o n x i c h i n G r o u p s , .k~,ong Groups and O v ~ r a 1: 1
a I .., . , : c ['ce of ti:e !,?.?'! 3-6 ?2?! I fode l s Ecr S t r c c t u r a l .k~al:;sqs azd
-1 T e c h n i q ~ ~ e ci ;inal::sis," P r i n c e t o n r c i v e r s i t y , R e s e a r c h ? I c g r a n , .
I, . . ;I~ , - ,*c l c p ~ e r ; ~ ''l,?nni::;, . ~ a s ! - , i n q ~ c n , 3 . C . : C . S . 3 i l r eau o f
( ~ * I I ~ ; I I S ( l Q 7 5 ) .
i : ~ ~ e ~ i e l o p - e i : : S t c d l e s , D i s c u s s i o n F a p e r :;o. 65 (Augus t 1 9 6 a ) . i
t 5 e
i c o n o n i c D e v e l o y c e c t ," h e r i c a n E C O ~ O ~ ~ C Review, V o l . 6 6 , lo. 2 ,
R o l l i 11sor-1 , S ,
I,... ~c,~..nrc!s zn Adirqllate Locg-Run >!ode1 of I n c o x e D i s t r i b u t i o n
( 1 0 7 6 h ) , p p . 122-26 .
and
/
Rotlpcr.;, (;. 15. , Y..J . I ) . l i op i r in s , and R . 'n'ery
. tc:on<1nic:-9enon,ra?':lic - h i o d e l l i n ~ f o r D e v e l o p x e n t P l a n n i n g : - - - -
Z . 7 c . l l ~ 1 e -- ?h i l i p p i z e s . Gexeva: I .L.O ( f o r t h c o m i n g 1 9 7 7 ) .
!; i r ;~ 111 , , J .
"i'opu1n:ion G r o l ~ t h Yay 3 e Good f o r L D C ' s i n t h e Long Run: . I
Sf n111.7t i o n Yodcl ," 7:ononfc Developnen: and C u l t u r a l
- * .h i r l g < r ~ l l , ,1.I1.
1 . ";i Cross -Sec : lon S t u d y of P o p u l a t i o n Growth a n d t h e G r c u t h o f
O l 1 t 7 i 1 t . ~ n c i Pe r C ~ ~ i t z i x c o n e i n a P r c d c c t i o n F u n c t i o n F r a z e v r k , " I?
