Labor migration and risk aversion in less developed countries.

E. Katz*, O. Stark

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

"In this paper we question the pioneering work of Todaro, which states that rural-to-urban labor migration in less developed countries (LDCs) is an individual response to a higher urban expected income. We demonstrate that rural-to-urban labor migration is perfectly rational even if urban expected income is lower than rural income. We achieve this under a set of fairly stringent conditions: an individual decision-making entity, a one-period planning horizon, and global risk aversion. We obtain the result that a small chance of reaping a high reward is sufficient to trigger rural-to-urban labor migration." excerpt

Original languageEnglish
Pages (from-to)134-149
Number of pages16
JournalJournal of Labor Economics
Volume4
Issue number1
DOIs
StatePublished - Jan 1986

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