What is the expected return of migrating to the city

Reference no: EM13224711

Rural-Urban Migration

Consider the following variation of the basic Harris-Todaro Model. Assume that the going wage in agriculture is normalized at 1. The wage in the formal urban sector is 3. The wage in the informal sector is 0.5. Additionally, 20% of working adults who live in the city are employed in the formal sector. Also, assume that the discount rate is 10% and that the lifetime of an individual is only 2 periods. Consider the following situations: [4 points in total]

a) Upon migrating to the city, the individual could participate in a training program in period 1 that would take up all of their time, but would increase their chances of getting a job in the formal sector to 63%.

What is the expected return of migrating to the city?

Determine whether the individual should migrate to the city or not. Show the criteria used in making his decision.

Reference no: EM13224711

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