Article ID Journal Published Year Pages File Type
970904 Journal of Urban Economics 2009 7 Pages PDF
Abstract

This study investigates the optimal urbanization control of an underdeveloped economy by specifying a simple dynamic rural–urban model in which the urban sector bears both an intertemporal positive externality and a simultaneous negative externality. The dynamic optimization problem is solved for the political intervention of the central government in an intersectoral population distribution with taxes and subsidies. Our analysis provides the following results: (i) a big-push policy that leads an economy to a higher-income steady state with urbanization is not necessarily desirable if the government cannot borrow money at a sufficiently low interest rate; (ii) in order to sustain an appropriate urbanization speed, urbanization control policy should have a switch: the urban sector should be subsidized in order to accelerate rural–urban migration in early stages of development, and taxed to decelerate and eventually cease the migration in later stages.

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Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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