Migration, Employment And Change Of Income Inequality: An Analysis Based On Harris-Todaro Model

In developing countries, economic growth has been biased towards the urban (modern) sector. Workers gradually migrate to the urban sector causing urban unemployment and other problems such as environmental degradation. The Harris-Todaro (H-T) model provides a powerful explanation of such phenomenon. There are a vast number of existing literatures following H-T analysis that focus on labor market policies for the purpose of reducing the level of unemployment.In the paper, we will follow the analysis of G. Fields, classified the labor market policies as the following three types: the modern sector enlargement (MSENL)-a policy of modern sector job creation; traditional sector enrichment (TSENR)-a policy of rural development; and combine of two policies. In analysis of income and employment, the paper introduced the wage elasticity of labor demand in rural sector (A). Through the calculation of the A and the comparison of A to the critical value of it, we get the clear conclusion of the change of mean income, urban unemployment level and unemployment rate under the different types of growth policies.Based on the analysis of income and unemployment, the Lorenz analysis of inequality under the different growth type was done. Some labor market policy may lead to Lorenz crossing. Hence the effect on inequality is ambiguous. This paper addresses the questions by applying the uses of coefficient of variation and Gini index.The conclusion of this paper is that the combine police of MSENL and TSENR will ensure the more equality in the process of development, through efficiency-equality trade-off in unavoidable. This is according with the current development police of China.