Labour market integration and the rural-urban wage gap in history

Abstract

Writers have often been moved by the evidence to comment on the degree of labour mobility. Nominal wage gaps between farm and city are one of the most pervasive aspects of modern economic growth. One of the most popular arguments for the equilibrium gap view can be found in the Todaro model, a pillar of development economics for more than twenty years. Measuring wage gaps based on cash wages is a hazardous business. Farm labour supply is determined chiefly by out-migration and, as a simplification, urban labour market conditions are viewed as exogenous to the farm sector. Farm labour demand is determined by marginal value productivity in the farm sector. Wage gaps between farm and city have attracted the attention of historians and development economists interested in industrialization because they are thought to imply market failure of significant proportions. France had much smaller wage gaps between city and countryside and also underwent slower industrialization and city growth. Show more