Consider the standard Harris-Todaro framework for rural-urban migration from class. I.e. there is a minimum wage in the formal urban sector and urban residents who fail to get a formal sector job wind up unemployed. In contrast, the agricultural labor market has no frictions. Now let's imagine that, due to climate change and mismanagement of water resources, the water table falls, reducing the marginal product of labor - and hence the wage - in the rural, agricultural sector. What effect would this have on the unemployment rate in urban areas? Choose the best option A. The urban unemployment rate would go up. B. The urban unemployment rate would stay the same. C. There is not enough information to determine what will happen to the urban unemployment rate. D. The urban unemployment rate would go down.
Consider the standard Harris-Todaro framework for rural-urban migration from class. I.e. there is a minimum wage in the formal urban sector and urban residents who fail to get a formal sector job wind up unemployed. In contrast, the agricultural labor market has no frictions. Now let's imagine that, due to climate change and mismanagement of water resources, the water table falls, reducing the marginal product of labor - and hence the wage - in the rural, agricultural sector. What effect would this have on the
A. The urban unemployment rate would go up.
B. The urban unemployment rate would stay the same.
C. There is not enough information to determine what will happen to the urban unemployment rate.
D. The urban unemployment rate would go down.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
