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Well it 's just that , you know , a pound , or 100 pounds today , is not the same as 100 pounds in a year 's time , or 2 , 2 years ' time .

Right .

So that would be opportunity cost ?

That 's right , yes , that 's right , so , in actual fact , this area here , right , is going to be the discounted sum of all future rural incomes .

Alright , now if we look at the , the rural instead of the urban wage rate , right , up here alright , now let 's just say that it takes that amount of time before this individual gets a job in the urban area , alright , now if we discount alright the erm , the rural , the urban wages right , that 's all this

Why have you just discounted it to there ?

Sorry ?

Why have you discounted it to W R ?

Well it 's , well , er , there 's no need why that should be the case , it could be , you know , it could look something like that .

But , up in the , there the migrant 's decision making process will be , is this area here right , is that area there , greater than that area there .

Alright , so this is the discounted sum in er , in non - agriculture , in the urban area , and this is the value , the discounted sum in agriculture .

Now , clearly on the , on the way I 've drawn this diagram it is .

Right , but that 's going to depend on right , not only the wage differential , now if the wage differential is very large it 's likely that this discounted sum is going to , you know , be larger than that .

But it also depends on the time it takes to get the job .

I mean if we got a job somewhere out here then it clearly would n't be .

So it 's this , it 's the time taken to get this erm , er , to get the job 's going to be important .

Now if we think of W U as being er , the expected value of the urban wage , and that equals the probability of getting a job , multiplied by the actual urban wages , alright then this probability of getting a job is going to be important as well .

And that 's it then , scruffy diagram , but what more have we got ?

An urban wage , a rural wage , right , we discount those wages over time , right and that area there , shading the area in the blue sort of box , then this it 's erm , it 's going to be rational for this er , migrant , this person to become a migrant .

Even though , I mean this does n't say anything about unemployment levels , levels of unemployment .

Unem the level of unemployment is subsumed between , well , within the time it takes to get a job , and also the probability of , of getting a job .

Alright .

So this sort of , even that 's just what the Harrison model erm , tells us , right , so that 's , unemployment rates are , are virtually erm , unimportant in the migrant 's decision .

Unemployment rates now , it 's because they may well be , if they 're acting rationally , discount over a very large , long period of time .

Okay just er , just to ask , is this erm , migration , it , does it cause a problem ?

I mean I thought that migration was the er , would be the cure of all ills , in that , you know , we 've got wage differentials here in this , in this hypothetical economy .

Surely if you migrate that increases the supply of labour , it reduces the supply of labour in the rural sector , it increases the supply of labour in er , the urban sector , unless wage , wage rates should equalize ?

No .

What , what , why do n't , why does n't , why do n't wage rates equalize ?

Because erm , the urban sector is normally considered to be capital intensive a sector , and the rural area in L D Cs are considered more labour intensive , and so erm , obviously when you get an influx of labour , and changes to the capital to labour ratio

Mhm

erm , and you would see er , a shift in capital to , to agriculture as the return on capital in urban falls ,

mhm

and this would , you would think , because there 's a shift back of capital to agriculture you 'd get a rise in agricultural wage rates because that changes the capital to labour ratio again and so this would counteract the movement .

However , there is a problem , capital is not perfectly mobile , like you can apply a new machine into , well maybe you could cos that 's .

Whatever , you ca n't apply the urban type of capital back onto the land , so it 's okay to say this would work if capital was completely and perfectly mobile , but it is n't so , you do n't get that and you do n't get balanced growth of that .

Because er , everything shifts in the wrong direction .

That 's right , I mean , in order to eq equalize wages between sector , labour and also capital has to be perfectly mobile .

Now , if it 's not , we know that labour is n't , is n't perfectly mobile , it appeared , migration would seem to suggest it 's , it 's pretty mobile geographically , but it may not be particularly mobile occupationally .

So that these people go to the urban areas to get the jobs , they 're not trained erm , for these jobs right and as a result , these wages rates still , may still be maintained despite the fact there are lots of people who are quite happy to take wages erm , in , take up jobs in the urban sectors , it 's the fact that sort of , employers do n't want them , because they do n't have the requisite skills .

Also , where , what are the erm , what 're the highest paid jobs in the urban sector ?

They are essentially in developing countries .

They are essentially government jobs .

Right .

Now , er , without wishing to generalize too much , bribery , corruption , you know , it 's not what you know , it 's who you know , are very important factors in er , in employment in developing countries .

And as a result they are

It 's much nicer to say patronage , you promise to say patronage .

Ah , patronage , okay , that 's er , a nice euphemism to see the

Then you do n't like slander people .

That 's right , in that erm , you 're , the probability of you getting a well paid job is greatly enhanced , if not guaranteed if you know er , the people who are employing you .

And this sort of thing goes , is , is rife in developing countries .

I mean the old boy network is pretty bad in this country , but er , it 's similar sorts of things go on in developing countries , and because there 's much less of an industrial sector there , the government sector itself , erm , plays a very important role in , in employment .

Now , was it you Lyn who had some statistics some saying er , what proportion

Fine I 've got , I've got to use stat statistics to

Well it works , erm , there were some

Yes .

I ca n't remember if it was you or somebody else , had er , some data as to how many of the er , jobs in urban areas where the government

I put erm , studies by Helen and Tate , 1983 , found public sector employment averaged 44 percent of non - agricultural employment in 20 L D Cs and in extreme cases were Tanzania and Zambia , were as high as 78 and 81 percent respectively .

And I think he quote those , or they did n't quote them in much , as much detail as I did in the lectures .

I 'd got these figures down , but I had n't really got anything against them , he just quickly went through the percentages so yes .

Okay , so

And developed countries averaged 24 percent , so it 's twice as much as developed countries .

Right , so given sort of erm , public and semi - public institutions , right , represent a large proportion of the non- agricultural erm , employment opportunities , and as a result , alright , the rates of pay in the , in the civil service , essentially , are going to , going to determine erm , the urban , the urban wage rate .

Now if those , erm , wages in the civil service are set , not through sort of market process , but sort of through institutional er , constraints , you know , it 's unlikely there 's going to be sort of er , union power erm , in these sorts of jobs , but nevertheless , civil servants tend to do quite well at giving themselves pay increases

Conservative government .

and er , and as a result , you know , institutes , the wages in government bodies tend to be quite high , and because gov government bodies represent such a large proportion of er , non- agricultural employment they , they represent a much more sort of , a much more potent influence than they would do in a , in a developed country where the government sector is much , much smaller .

Erm okay what was the importance of implication of er , Harrison model ?

There was one policy implication .

That , what was it , that erm people still move .

Obviously , we that right , people will still move if unemployment 's high , but if you try , if the government tries and gets rid of unem urban unemployment , say people have moved because of it , so there 's unemployment there to start with because of the reasons we 've discussed earlier , so then the government said okay , well let 's get rid of the unemployment that has occurred already , by erm , either , at the same wage rate trying to well yes , the same , they 'll keep wage rates the same , but erm , increase , you know , make the public sector bigger or , or do something to create urban jobs , and basically all it will do is , encourage more migrants because they 'll see the probability of getting a job will increase so the expected wage will increase so you 'll get migration on top of what 's already occurring .

And , erm , you wo n't solve anything .

That 's right , so , if you want to try and erm , minimize urban unemployment , right , or it 's futile to try and minimize urban unemployment by erm , er , establishing employment er , job creation schemes in urban areas , because that will increase the probability of getting a job if you 're a migrant .

Right , so there are these government job creation schemes , alright .

Now , because it 's typically observed in the Harrison model shows this under certain circumstances to be the case , that , erm , a sort of erm , migration elasticity with respect to income differentials , right , is much greater than the erm ,

The rate of unemployment , the level of unemployment

That 's right , yes , yes , that 's right , because erm , there 's a gre there 's a higher elasticity of migration inelasticity in respect to income differentials than there is to unemployment , any job creation schemes will lead to more migration , rather than , rather than less , so how , how best to get round the problem ?

If job creation schemes are n't in urban areas , are the best way to get round them , is n't it , if we can show , quite simply , that job creation schemes lead to more migration , which lead to more unemployment .

The policy 's self repeating , what policies might ?

A policy of cross - training , for all areas .

Okay , yeah , so , what might those , what form might those policies take , what might they be ?

on it .

Yes , population controls , that 's right , that 's one , I mean , one reason , one way of getting rid of the migration is to , is to , is to limit population growth .

Where 's the population growth highest ?

It 's at its highest in rural areas , this is what 's being done .

Erm , population control is always focused out in the rural areas , the most difficult place to do it , because populations are dispersed , er , that 's where population growth , right , is the highest .

Any other ?

Making incentives to actually raise the wage rates in the , in the rural areas so , sort of to , to increase production or , and through , through farming .

To improve their situation ,

Right , yeah

improve their wages through farming and perhaps

That 's right ,

put more infrastructure in so that then the farmers can send their children to school rather than work on the land .

yeah , that 's right , what we want to try and do is to improve the erm , the returns to , to agriculture which is the main form of er , sort of income in rural areas .

I mean if you do things like that while improving infrastructure , erm , setting up credit , government credit facilities , er , so , so , so we can lend , we could lend money to small farms .

Increase in information about unem unemployment itself , that is a , that is a problem , people have this misapprehensions about the probability of getting a job

You could also erm , start to recognize the benefit of the rural sector , and one reason why they were discriminating , L D Cs tended to want to ignore that and sort of shun it , because it 's not sort of a glamorous image they were trying to hope for in the urban sector , and , so , if they did help them , say give them units , like the repair men , units to work in , and they put them in really totally crappy accommodation , and up not where you need it , and not where people pass by with their motors and things , they , they 'd put them somewhere up on a hill , overlooking a city , so erm , to encourage the informal sector by erm , sort of on a par with the formal sector because erm , their inter- reacting , inter - relating now , like they 're providing cheap inputs for the formal industries and , and the formal industries are pro providing clientele all for the informal sector , and so it 's all inter - linked and , and it 's there now .

It 's not going to disappear , cos it 's quite a large part of urban areas .

They could do that .

Yes , we want to try and improve resource allocation in the economy and one way of doing that is not necessarily subsidizing agricultural production , but remove the taxes on agricultural growth .

Alright , and effectively what 's , what 's happening is that the government sectors in erm , in developing countries are very highly subsidized .