The story of migration in Latin America and the Caribbean in the 20th and early 21st century is one of a mass exodus from rural areas to cities. Less than half of the population in the region lived in the cities in 1960. By 2016 that had soared above 80%.
The motivations behind this mass movement are critical. While some rural migration is forced, driven by extreme events such as climate-related disasters or armed conflicts, large numbers of people leave their rural homes for other reasons. Indeed, they continue to pour into the cities despite finding often poor working and living conditions there. What urges them on? Is it the difference in wages between the countryside and the urban centers including the possibility of better supporting themselves and their families? Or are they compelled more by non-monetary factors, including better amenities, like healthcare and education?
Rural Migration in Brazil
We explore these issues in a recent paper, examining Brazilian cities from 1991-2010. Between 2000-2010 2.8 million people in Brazil migrated from rural municipalities to urban areas. That was equivalent to almost 30% of the internal migration to cities, and 9.7% of the rural population (Figure 1). We wanted to see what was driving this migration, as it has immense implications for everything from urban job creation to housing policy.
Figure 1: Internal migration of working-age individuals
Note: National-level estimates constructed from individual census microdata. We define migrants as working-age individuals who lived in a different municipality five years before the census. Urban migrants are those residing in cities at the time of the census.
A higher concentration of people in metropolitan areas has positive effects on productivity and development. But it can also generate difficult socioeconomic conditions for migrants, including high levels of underemployment and informality, greater inequality, limited access to public services, and poor health. These drawbacks can, in turn, lead to more social conflict and crime. Understanding migrants’ motivations can help mitigate those problems and ensure that they are successfully absorbed into the urban fabric for their benefit and that of society at large.
A key point of departure is an influential theory elaborated in the 1970s by John Harris and Michael Todaro. These economists held that rural-urban migration would continue even when the risk of unemployment was high as long as the expected wage in the city (including the possibility of unemployment) was larger than the rural one. Harris and Todaro were writing at a different time and had in mind societies that were still predominantly rural, with enormous income gaps between urban and rural areas. But as urbanization progresses, those gaps decline. Other explanations are likely to matter more, such as access to the urban amenities, like public education and healthcare. Our goal was to see whether the traditional explanation of what drives rural-urban migration is still useful to understanding the continued flow of rural migrants to cities in a region that is already highly urbanized, like Latin America and the Caribbean.
A Look at the Wage Gap as a Driver of Rural Migration
Our analysis found that, in highly urbanized Brazil, the expected wage gap continues to be a good predictor of rural-urban migration, as long as the expected wage also includes potential income from the informal sector. This is illustrated by the red line in Figure 2, which shows the distribution of the expected urban-rural wage gap (measured as the ratio between the expected urban wage and the rural wage) across the 449 cities in our sample. Here, the expected urban wage is calculated considering the potential earnings of migrants in both the formal and the informal sector, and the likelihood that they will end up working in either one of them. Most cities have a ratio close to one. The migration we could observe, in other words, was the same as that predicted by the expected wage gap.
Figure 2: Ratio of Expected Wages (Urban-Rural)
Note: Author’s calculations based on individual census microdata
Some observers regard the urban informal sector as a source of under-employment with limited economic opportunities. Instead, we find that informal wages in cities are frequently larger than rural wages, and the possibility of working in urban informal jobs is more of an incentive than a disincentive for potential migrants.
We also look at the cost of living. In Brazil, the average housing rent in cities in 2010 was nearly 200% above that in the rural areas of the migrants’ origin. This means that the advantage in wages of moving to cities may not be as large in real terms for rural migrants. We estimate the urban-rural expected wage gap including the difference in cost of living between urban and rural areas, as captured by the average cost of renting a house in both types of localities. The distribution of this gap across the 499 cities in the analysis sample is shown in the blue line of Figure 2. Our conclusion is that even though greater urban living costs will be taken into account by potential migrants, they don’t deter them. The real wage difference between the cities and countryside remains a powerful predictor of migration. It is, moreover, a particularly good predictor in cities that are close to the rural areas from which they draw migrants and that are better prepared to absorb migration flows.
Ensuring the Integration of Rural Migrants Into the Cities
Rural-urban migration is a complex phenomenon, and no single explanation can capture the multiplicity of motivations that prompt people to pull up their roots in the countryside and move permanently to cities. But if the expected urban-rural wage gap continues to be a prime predictor of migration, as we’ve shown, improvements in urban job opportunities are likely to encourage this movement. That, in turn, could create a situation in which some urban economies may be unable to absorb the inflow of new workers, and they end up unemployed or underemployed.
This risk, which is often referred to as the “Todaro Paradox,” is a cautionary tale. It implies that urban policymakers trying to create and formalize jobs, as well as promote income growth in Latin American cities — particularly those that are likely destinations for rural-urban migrants — need to consider the indirect effects that their policies might have on rural workers’ decision to migrate. A move to the city may lead to improvements in a person’s welfare. But intense and continuous migration can also generate higher rates of labor informality and inequality, as well as other social problems. The demand for housing and public services will also likely increase, and in the absence of planning and infrastructure investment, may result in the expansion of slums and other types of informal neighborhoods. Rural migration to the cities will almost certainly continue in Latin America and the Caribbean. Urban employment promotion policies must be designed to provide opportunities for both current residents and those who will come in search of better opportunities.