Journal
JOURNAL OF DEVELOPMENT ECONOMICS
Volume 96, Issue 2, Pages 461-475Publisher
ELSEVIER
DOI: 10.1016/j.jdeveco.2010.07.007
Keywords
Urbanization; Risk; Natural resources; Volatility; Rural-urban migration
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Rapid urbanization also happens when economic growth and urban job creation are absent, such as in Africa and Latin America during the eighties. Why do some countries urbanize faster while having worse economic growth? This paper finds that higher aggregate agricultural risk induces rural-urban migration, providing an additional channel to explain the urbanization trend. Uninsurable expected risk will lead to rural-urban migration as a form of ex-ante insurance if households are liquidity constrained and cannot overcome adverse shocks. The effect is robust to controlling for the traditional view of urbanization driven by industrialization, and to several alternative explanations such as government spending. (C) 2010 Elsevier B.V. All rights reserved.
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