migration, urbani zation and development: a case study of mexico (1978)

8/3/2019 MIGRATION, URBANI ZATION AND DEVELOPMENT: A CASE STUDY OF MEXICO (1978)

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MIGRATION, URBANI ZATION, AND DEVELOPMENT:A CASE STUDY OF MEXICO

Donaldo ColosioLuis J . CastroAndrei Rogers

August 1978 WP-78-27

Working Papers are i n t e r na l pub l i ca t ions in tendedf o ~ i r c u l a t i ~ n with in the In s t i t u t e only ..0p1n1ons o r V1ews conta ined here in are so le lythose o f the authOrs .

This paper has been prepared f or p re se nt at io na t the Fourth Congress o f the National Academyo f Engineering Merida, Mexico, O cto ber 1 0-1 3,1978. The authors are gra t e fu l fo r th e valuablecomments and advice o f Clark Reynolds, AllenKel ley , Pe te r de Janos i , Henry Rempel, FransWillekens, and Jef f rey Will iamson.

2361 IaxenburgAustria International Insti tu te for Applied Systems Analysis


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Conten ts

INTRODUCTION

URBANIZATION AND DEVELOPMENT IN MEXICO:A BRIEF OVERVIEW

URBANIZATION DYNAMICS IN MEXICO:TWO ALTERNATIVE SCENARIOS

The Two Scena r io sDemographic Consequences

A THREE-SECTOR MACRO-MODEL OF THE MEXICAN ECONOMYProduc t ionLabor MarketsLabor Migra t ionCap i t a l Markets

CONCLUSION

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M igr at io n , U rban iz at io n , and Development:A Case Study of Mexico

Donaldo Colos io , Luis Castro , and Andrei Rogers

INTRODUCTIONThe In t e rna t i ona l In s t i t u t e fo r Appl ied Systems Analys is

(IIASA) i s a non-governmental research organ iza t ion founded in1972 on th e i n i t i a t i ve of th e Academies o f Science o r e qu iv ale nti n s t i t u t i on s in more developed count r ie s , both with market andplanned economies. The I n s t i t u t e , supported pr imar i ly by annua lcont r ibu t ions from i t s 17 member na t ions , conducts and s t imula tesresea rch on problems of modern soc ie t i e s .

A group o f scho la rs a t IIASA i s s tudying na t iona l processeso f s t ruc tu ra l t r ans fo rmat ion , see ing to fu r the r our unders tanding o f th e r e l a t i onsh ips between agr i cu l t u re , indus t ry , and urbani z at io n in economic development . An i n t eg ra l component o f t h i sac t i v i t y i s a co l l e c t i on of na t iona l case s tu dies o f urban iza t ionand development exper iences , among them Mexico 's .

Mexico ' s development h i s to ry i s a pa r t i cu l a r ly notable ex ample of a s t r u c t u r a l t r ans fo rmat ion involv ing high f e r t i l i t y ,l a rge - s ca l e commercial agr i cu l t u re , massive ru ra l to urban migrat i on , and rap id urbaniza t ion . Thus, s tu die s o f ag r icu l tu re ' s ro lein economic development s t ra tegy and th e process o f s t r u c t u r a lt ransformat ion t h a t it induces in developing coun t r i e s o ften p oin tto Mexico as a po la r proto type to coun t r i e s such as Japan:

Most developing count r ie s face a bas ic i s su e o f ag r i cu l tu ra l development s t ra tegy t h a t can be crudely def inedas a choice between the "Japanese model" and th e "Mexicanmodel" th e inc rease in farm ou tpu t and produc t iv i ty inJapan re su l ted from the widespread adopt ion o f improvedtechniques by th e g rea t majori ty of the na t ion ' s farmerswhereas in Mexico a major pa r t o f the impress ive increasein ag r i cu l t u re output in the postwar per iod has been th er e s u l t o f ext remely l a rge in cre ases in product ion by a verysmal l number of l a rge - sca l e , highly commerical farm oper a to r s ( Johns ton, 1970, pp.86-87) .


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The urban/demograph ic consequences o f the Japanese and Mexicansuccess s t o r i e s d i f fe red s ign i f i can t ly ; itis, t he re fo re , impor tan tto a l so keep them in mind when evaluat ing each o f the two exper i ences . The aggregate annual popula t ion growth r a t e o f Mei j i , Japanwas l e s s than one percen t ; t h a t of Mexico today i s over th ree t imesas h igh . U rbaniza tion proceeded a t a re la t ive ly moderate pace inJapan dur ing i t s s t r u c t u r a l t r ans fo rmat ion ; in Mexico i t s pace hasbeen s t a r t l i ng ly high with Mexico Ci ty alone pro jec ted to have apopula t ion in excess o f 30 mil l ion by th e end of t h i s century .

Analyses o f the causes and consequences o f i n t e r na l migrat ion ,urbaniza t ion and d ev elo pmen t c an use fu l ly be ca r r i ed o ut w ith in th eframework o f formal models o f demographic and economic (demoeconomic ) development. Severa l approaches to th e design o f such a f ramework a re avai l ab le , ranging from th e cons t ruc t ion o f a de t a i l edplanning model to the e labora t ion o f a more aggregated genera l -equ il ibr ium demoeconomic development and growth paradigm. The l a t t e rapproach i s fol lowed in t h i s s tudy . A demoeconomic model in th et r ad i t ion of economic dual ism, as charac ter ized by the work o fKel ley , Will iamson, and Cheetham- (1972), forms th e core o f our ana ly t i c a l apparatus . While t h i s paradigm has been shown to be qui teusefu l in ident i fy ing seve ra l o f th e sources o f economic grow th ands t r u c t u r a l change in Japan , modi f ica t ions in i t s s t ruc tu re appearto be necessary to i nc rease i t s re levance to the s tudy o f urbani za t i on in Mexico. Severa l o f t he s e mod if ic at io n s a re out l ined inthe l a t t e r ha l f o f t h i s paper .


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URBANIZATION AND DEVELOPMENT IN MEXICO: A BRIEF OVERVIEWThe Mexican economy has exper ienced, in r e cen t decades , a

process o f rapid i ndus t r i a l i za t ion and s i gn i f i c an t s t r u c t u r a lchange. From 1940 to 1970, Gross Domestic Product (GOP) percap i t a grew a t an a nn ua l a ve ra ge r a t e of 3.2% per annum [Sol i s(1971), pp .104 -105]. This growth occurred a t a t ime when th eaverage annual r a t e of popula t ion growth was 3.5% [Unikel e t a le

,7'>.: (1 976) , p . 32] .A more deta i l ed s ec to r al a n al ys is , i d en t i f i e s th e pr inc ipa l

under ly ing c h a n g ~ s in the produc t ion s t ruc tu re t ha t made t h i sgrowth poss ib le . The' share o f GOP a tt r ib u ta b le to ac t i v i t i e sl inked t.o r u r a l areas ( ag ri cu ltu re , l iv e st oc k , fo res t ry and f i s h -.... ' '. . . .i ng ) , f e l l from 36% a t th e beginning o f t h i s century to 17% in1965. In th e same per iod , th e share of the manufacturing s ec to rincreased from 16.5% to 25.3% [Sol i s (1971), pp.90-91] .

This s t r u c t u r a l tr an sf or m at io n d id no t occur withou t subs t a n t i a l changes in p roduc t iv i ty l eve l s . From 1940 to 1970,average produc t per worker in th e economy as a whole, t r i p l ed .This was mainly th e ~ e s u l t of subs t an t i a l r e l a t i v e growth inproduc t iv i ty per worker a t th e s ec to ra l le v el , with agr i cu l t u reexhib i t ing th e h ig hest r e l a t i v e i nc rease of 123%, manufacturingan increase of 99%, and the t h i rd s ec to r , composed mainly o fse rv ice ac t i v i t i e s , showing a surpr i s ingly high i nc rease of 104%[Unikel e t a l . (1976), p . 3 2 ] .

From th e myriad o f f a c to r s under ly ing these s ign i f i can tchanges in produc t iv i ty , one might expect t h a t t echno log ica lprogres s , ru ra l -u rban migra t ion , and heavy in fr a s t r uc tu ra l in vestment played an impor tan t r o l e . The l a t t e r f a c to r i s genera l ly considered to have been par t i cu la r ly c ruc i a l in r a i s i ngthe cap i t a l - l abor r a t i o o f th e economy. A s tudy by Hansen (1970)shows t h a t , in a per iod of seven year s (1940 to 1947) , t o t a l annual gross f ix ed cap i t a l format ion doubled as a percentage o fGNP. I t a l so shows the very impor tant ro l e of the pub l ic s ec to rin cap i t a l format ion [Hansen (1971), p.61 ] . Spec ia l a t t en t i onwas given to the ag r i cu l t u r a l sec tor by th e fede ra l government


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during th e ea r ly s t age o f Mexico 's development . Agr icu l tu re ' sshare o f f ede r a l inves tment was 10% around 1930, and increasedto 19% by 1945 [ Ibar ra (1970), p.115] .

With cap i t a l - l abo r r at io s r i s in q in th e economy as a wholeand in th e ag r i cu l tu r a l sec to r in pa r t i cu l a r , one would expec ta l a rge f low o f l abor from r u r a l to urban a r eas . Mexican s t a t i s t i c s show how th e coun t ry ' s popula t ion has gone th rough aspec tacu la r change in i t s spa t i a l d i s t r i bu t ion in r ecen t year s ,as th e urban popula t ion has increased from 4 m ill ion in 1940 to21.5 m ill io n in 1970. For th e same per iod , th e propor t ion ofurban t o t a l popula t ion has almost doubled every 10 years . [ t ab le1] . A s ign i f i c an t cont r ibu t ion to t h i s urbaniza t ion process i sa t t r i bu t ed to ru ra l -u rban m ig ra tion , as ind ica ted by a r ecen ts tudy which s t a t e s t h a t an averaqe of 42% of urban growth inMexico has been caused by r u r a l out -migra t ion [Unikel e t a le(1976), ,pp. 44-46] ~

. -- ..- .- - --... , _...These t r an s f e r s of th e l abor force a re , undoubtedly , r e s

ponsible fo r major change s in product ion , employment, incomed i s t r i bu t i on , and consumption pa t t e rn s . For example, dur ingthe decade fol lowing the years of heavy r u r a l publ ic inves tment(1940 to 1950) , 54.2% of th e change in aggregate produc t i v i t yhas been a tt r ib u te d to sh i f t s of labor from ag r i cu l tu re to th ei ndus t r i a l and serv ice s ec to r s [Colosio (1978a)]. This sharewas subs t an t i a l l y lower (23.0%) fo r th e decade 1950 to 1960,due perhaps to th e concent ra t ion o f employment in a c t i v i t i e swith low product iv i ty . However, the sh i f t - sha re index shows anunexpected i nc rease (36.0%) during th e 19 60 's , desp i t e th e cont i nua l ly i nc r ea s ing ou t-m ig r at ion of l abor from r u r a l a reas andthe expanding employment in t e r t i a r y a c t i v i t i e s . A poss ib leexplanat ion i s th e r i s e of a l te rna t ive employment oppor tun i t i e sin fore ign l abor markets (such as in th e United Sta t e s ) .

The f ac t t h a t th e manufacturing s ec to r has no t been dynamicenough to absorb the growing l abor force i s notab le in th e Mexican dev elopmen t exper ience . From 1940 to 1970, th e i ndus t r i a ls ec to r absorbed only an average of 19% o f th e t o t a l economical ly


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ac t ive popula t ion , agr i cu l t u re absorbed 55% and s e rv i c e s 26%.Two fa cto rs co ntr ib utin g to t h i s phenomenon a re be l ieved to

be th e high r a t e o f p op ula tio n growth and th e adopt ion o f l abor -saving i ndu s t r i a l t echnology . The l a t t e r can be confi rmed bydete rmining th e e l a s t i c i t y o f sUbs titu tio n in th e Mexican manuf ac tu rin g s ec to r, which i s expected to be l e s s than one . Af i r s t very rough approximat ion o f such an e l a s t i c i t y [Colosio(1978b)] yie lded a value of 0.79 i nd ica t ing the i ndu s t r i a l sec -t o r ' s i n ab i l i t y to respond r ap id ly enough to changes in f a c to rsupply . This has forced a cons id e rab le p r opo rt io n o f th e l aborfo rce to engage in t er ti a r y a c ti v it ie s , whose r a t h e r l a rge s izein Mexico 's s tage of development, i nd ica tes t h a t s t r e e t vendorspet ty merchants , and o the r forms o f disguised unemployment arepro l i f e r a t ing . This hypothes is i s suggested in a s tudy by Iba r r a(1970, p .118) , which concludes t h a t th e share of those with th elowest incomes ( the poores t 50% of the popula t ion) f e l l from 19.1%o f the t o t a l income in 1950 to 15.4% in 1963 to 1964. Furthersuppor t i s provided in a recen t s tudy on Mexican income inequal -i t i e s which i nd i ca t e s t h a t in 1968, 60% of the count ry-wide in -equa l i t y was due to inequa l i ty within urban areas [Van Ginneken(1976), p .29] .

In ad ditio n to af fec t ing changes in produc t iv i t y l eve l s ,th e t r ans fe r o f l abor from r u r a l to urban areas i s l i ke ly tohave had an impact on the r e s t o f the economy by a l t e r i ng consumption pa t t e r s in a manner t h a t s t imulated the growth o f manufac tur ing ou tpu t . A survey of income and expend i tu res o f Mexican households developed in 1963, ind ica ted t ha t income e l a s t i c -i t i e s fo r ag r i cu l t u r a l commodities were higher in ru r a l thanurban a reas , whereas income e l a s t i c i t i e s fo r manufactured goodswere higher among urban than ru r a l consumers [Sol i s (1967),p .68] .

In a s i t ua t i on of major demographic change, such as occur redin Mexico, d i f fe rences in consumption behavior are l ik ely to havea r e l a t ive ly l a rge inf luence on the composi t ion o f demand an on


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the produc t ion s t r u c t u r e . The degree to which migrants adopturban consumption hab i t s undoubtedly accounts fo r a s ign i f i can tpa r t o f the decl in ing share of agr i cu l tu ra l ou tpu t in MexicanGOP, and the concomitant in cre ase in th e share o f manufacturingdur ing th e per iod 1940 to 1970. In t h i s con tex t , Reynolds hasobserved t h a t , a l though th e p ro du ctiv ity o f workers in lowersk i l l ed urban occupat ions may no t have increased notably , theseworkers h av e w id ened the market fo r i ndu s t r i a l goods t h a t a resub jec t to i nc reas ing r e t u rn s , the reby permi t t ing average pro- ,duc t iv i t y ga ins in th e manufacturing sec tor [R eyn old s (1 97 0) ,p.182] .

Table 1. Mexico 's Populat ion: Tota l , Urban, and Rural(in thousands)

YEAR TOTAL POPULATION URBAN POPULATION RURAL POPULATIONa b a b1900 13607 1434 2563 12173 110441910 15160 1783 3034 13377 121261921 14334 2085 3287 12249 110471930 16553 2982 4234 13661 123191940 19649 3928 5420 15721 142291950 25779 7198 9223 .18581 165561960 34923 12747 15504 22176 194191970 48377 21721 28329 26656 20048

Source: Unikel e t a l . (1976), p . 30 .a. D e fin it io n o f urban: popula t ion in l oca l i t i e s of 15,000 o rmore.b. D ef in it io n o f urban: popula t ion in l oca l i t i e s of 2,500 o rmore.


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URBANIZATION DYNAMICS IN MEXICO: TWO ALTERNATIVE SCENARIOS 1

The urban iza t ion of a na t iona l popula t ion evolves ou t o f apa r t i cu l a r combinat ion o f spa t io - t empora l ly changing r a t e s ofb i r t h s , dea ths , and i n t e rna l migra t ion . The process i s charac t e r i zed by d i s t i n c t ru ra l -u rban d i f f e r en t i a l s in f e r t i l i t y andmor ta l i ty l eve l s and t h e i r pa t t e rns o f dec l ine , and by a mas-s iv e, la rg ely voluntary , ne t t r ans fe r o f popula t ion from r u r a lto urban a reas .

Over a decade ago, Ansley Coale (1969), i den t i f i ed some o fth e ways in which a l t e rna t i ve demographic t r ends might a f f e c tth e development o f l e s s developed count r ie s . He focused on nat io na l ra th er than r e g ion a l popul at io n s, cons idered only a s i n g le fu tu re course fo r mor ta l i t y , and examined th e demoeconomicconsequences o f two a l t e rna t ive fu tu re courses fo r f e r t i l i t y :

A) maintenance a t its cu rren t le ve land

B) a ra pid d ec lin e to ha l f its cur ren t l eve l over aper iod o f twen ty - f ive years .

Af te r g en era tin g th e two a l t e rna t ive pro j e c t ions o r " scena r i os" , Coale w ent on to

inqu i r e what e f f e c t s t hese cont ras t ing t rends in f e r tility would have on th ree impor tant popula t ion charac te r i s t i c s : f i r s t , th e burden of dependency, def ined as thet o t a l number o f persons in th e popula t ion div ided by thenumber in th e l abor force ages ( f i f teen to s i x ty - fou r ) ;second, th e ra te o f growth o f th e labor fo rce , o r , moreprec i se ly , th e annual per cen t r a t e o f inc rea se o f thepopula t ion f i f t een to s i x ty - fou r ; and t h i r d , the d en si tyo f the popu la t ion , o r , more prec i se ly , the number o f pe r sons a t l abor force age re la t ive to land a rea and o the rresources . Then we sha l l cons ider how these t h r e e charac t e r i s t i c s o f dependency, r a t e o f growth, and dens i ty , in f luence the inc rea se in per cap i t a income.[Coale (1969), p .63] .

lA f u l l e r desc r ip t ion and an aly sis o f th e u rb ani za ti on s c en a ri osdeveloped in t h i s sec t ion wi l l appear in Rogers and Cast ro(1978) .


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In order to assess some o f the impor tant demographic con-sequences o f rap id urban iza t ion , we have d is ag g re ga te d Co a le 'sscenar io -bu i ld ing approach by d iv id ing h is na t iona l popu la t ionin to urban and r u r a l s ec to r s and by in t roduc ing th e impacts o fru ra l -u rban migrat ion on t h e i r r eg iona l age composi t ions andpopula t ion t o t a l s . Since our focus i s on Mexico as a cases tudy, we a l so have r ep laced Coa le 's h y p oth e tic a l na t i ona l popu-l a t i on o f a mil l ion people with th e 1970 popu la t ion o f Mexico.

The Two Scenar iosTable 2 summarizes our assumptions regarding fu tu r e pa t

te rn s o f urban- ru ra l f e r t i l i t y , mor ta l i t y , and migra t ion , andit also se t s out Coale ' s parametr ic assumptions fo r purposes o fcomparison. Scenario A, l i ke tha t o f Coale, assumes a cont inua t ion o f cu r ren t l eve l s o f f e r t i l i t y ; Scenar io B, aga in l i ket h a t o f Coale, assumes a sudden r educ t ion in f e r t i l i t y l eve l s .The fu tu r e courses o f mor ta l i ty and i n t e rna l migrat ion a re a s sumed to fol low i d en t i c a l pa ths in both scenar ios ; thus f e r t i l i t y i s th e so le popula t ion change var iab le cons idered to berespons ive to governmental po l i cy . (The s tudy o f migra t ion asa pol icy va r i ab l e wi l l be ca r r ied ou t in the fu ture , w ith in th eframework o f th e demoeconomic model descr ibed in th e l a t t e r ha l fo f t h i s paper . )

Both scenar ios s t a r t with th e observed 1970 popu la t ion asth e i n i t i a ~ popula t ion . But th e projec t ion exerc i se inc ludesa h i s to r i c a l projec t ion (for the 1940 to 1970 per iod) t h a t" t racks" th e observed t r a j e c to r i e s remarkably wel l , with th epro jec ted urban p op ula tio n, fo r e xamp le , a lways f a l l i ng with in7% o f th e recorded va lues .

F igure 1 shows t ha t t he u rb a niz at io n t r a j ec to ry pro jec tedfo r Mexico accords well with th e h i s t ov i ca l exper ience o f na-t i ons t h a t have al ready become highly urbanized. Mexico ' s 1970urban popula t ion (here def ined as th e popula t ion l iv ing in p laceswith more than 2,500 inhabi tan t s ) . o f 28 mil l ion cons t i t u t edroughly 55% of th e n at io na l t o t a l . By the tu rn o f t h i s cen tu ry ,about t hr ee -f o ur th s o f Mexico 's popula t ion i s pro jec ted to be


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urban i n each o f t h e two s c e n a r i o s . According t o Table 3 , a tt h i s t ime t h e urban p o p u l a t i o n w i l l have i n c r e a s e d t o 14 t imesits 1940 l e v e l if f e r t i l i t y i s maintained a t 1970 l e v e l s and t oj u s t over 11 t imes if f e r t i l i t y i s s h a r p l y reduced i n t h e mannerd e f i n e d by Scenar io B. The corresponding m u l t i p l e s o f t h e 1970urban p o p u l a t i o n a r e approximately f o u r and t h r e e , r e s p e c t i v l y .

Demographic ConsequencesF i g u r e 2 shows how t h e t h r e e p o p u l a t i o n c h a r a c t e r i s t i c s

s t u d i e d by Coale (1969), vary i n t h e i r s i g n i f i c a n c e i n t h e s h o r t ,medium, and long runs i n our two s c e n a r i o s o f Mexico 's f u t u r ep o p u l a t i o n grow th and u r b a n i z a t i o n . The f i r s t p r i n c i p a l impacto f t h e d e c l i n e i n f e r t i l i t y i s a 25% d e c r e a s e i n t h e dependencyburden over two g e n e r a t i o n s , fol lowed i n t h e subsequent two gene r a t i o n s by an i n c r e a s e t h a t b r i n g s t h e r a t i o t o approximately85% o f i t s c u r r e n t l e v e l . The medium-run i m p ~ c t o f f e r t i l i t yr e d u c t i o n b e g i n s t o appear about 15 t o 20 y e a r s a f t e r t h e o n s e to f t h e f e r t i l i t y d e c l i n e , producing an annual r a t e o f l a b o r f o r c egrowth t h a t d e c r e a s e s f o r about 60 y e a r s and then r i s e s , over t h en e x t 40 y e a r s , t o a l e v e l t h a t remains r e l a t i v e l y f i x e d t h e r e a f t e r . F i n a l l y , t h e long- run e f f e c t s o f reduced f e r t i l i t y s t a r tt o become s i g n i f i c a n t a f t e r 60 y e a r s ; a t t h i s p o i n t t h e s i z e o ft h e high f e r t i l i t y p o p u l a t i o n i s roughly t w i c e t h a t o f t h e onew ith re du ce d f e r t i l i t y , and t h i s r a t i o assumes e v e r i n c r e a s i n gdimensions t h e r e a f t e r .

The i n t r o d u c t i o n o f m i g ra t i o n a s a component o f change andt h e concomitant s p a t i a l d i s a g g r e g a t i o n of a n a t i o n a l p o p u l a t i o ni n t o urban and r u r a l s e c t o r s b r i n g s i n t o s h a r p focus u r b a n - r u r a ld i f f e r e n t i a l s i n dependency burdens and i n t h e p a t t e r n s o f t h e i rd e c l i n e fo l lowing f e r t i l i t y r e d u c t i o n . This i s a l s o t r u e o f t h ed i f f e r e n t i a l s i n t h e i n i t i a l growth r a t e s of t h e l a b o r f o r c ep o p u l a t i o n and t h e p a t h s by which t h e y converge t o t h e i r l o n g - r u nl e v e l s .

The dependency r a t i o i n urban a r e a s in Mexico was over 20p o i n t s lower than i t s r u r a l c o u n t e r p a r t i n 1940, b u t a conver gence of t h e two r a t i o s reduced t h e d i f f e r e n c e t o 7 p o i n t s by


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'PERCENTAGE URBAN ANDOUTMIGRATION RATES: (PER 1000)

9080

7060

50403020

10

_ - -........... RURAL TO URBAN-- ...........~ - - - - - - -- - " ". ......... .......-. URBAN TO RURAL ........ J : "-""" -- - - -------_._. - .. _._.-1940 1960 1980 2000 2020 2040YEAR 2060 2080 2090

Figure 1. Percentage urban, and rural urban and urban - rural outmigration rates:


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1970. This di f fe rence ul t ima te ly drops to p r ac t i c a l l y zero inboth scenar ios , with th e r a t io s t ab i l i z ing a t j u s t ove r 200 inth e c on sta nt f e r t i l i t y projec t ion and l evel ing o f f a t abou t 30po in t s under t h a t t o t a l in the reduced f e r t i l i t y scenar io .

The annual r a t e s of growth o f th e lab or fo rce p op ula tio n inurban and r u r a l areas in 1940 were 0.035 and 0.020, r e spec t i ve ly .By 1970 th e di f fe rence between t hese two r a t e s more than doubled,with th e urban r a t e peaking a t 0.050 percen t per annum. In scenar io A t h i s ra te dec l ines to a s t ab l e leve l o f 0.034; it dropseven fu r t he r in the reduced f e r t i l i t y projec t ion , s t ab i l i z i ng a ta l eve l o f 0.018.

The r u r a l r a t e , dec l in ing a t f i r s t , begins to " turn-around"by th e end o f the century in Scenar io A and a f t e r some twentyyear s l a t e r in Scenar io B. In th e cons tan t f e r t i l i t y pro j ec t ionit lev els o ff a t an annual r a t e o f increase o f 0.040 pe rcen t ; inth e reduced f e r t i l i t y scenar io the s t ab i l i za t ion comes ea r l i e rand s tands a t th e lower ra te o f 0 .023 , j u s t exceeding its 1940l eve l .

The economic consequences o f th e projec ted pa t t e rns o f dependency, growth, and dens i ty in th e two u rb an iz ati on s ce n ar io sa re s imi la r to those descr ibed by Coale (1969), bu t they now in c lude a spa t i a l dimension. F i r s t , th e pressure fo r a l l oca t i ng amuch h igher p ropo rt io n of th e na t iona l product toward consumpt i on i s l i ke ly to be grea t e r in th e high f e r t i l i t y popu la t ionbecause of i t s grea t e r dependency burden. The capac i ty to r a i sene t inves tment l eve l s in such popu la t ions , t he r e fo r e , wi l l bese r ious ly impaired. But i f u rb an h ou se ho ld s save a . la rg er f ra ct ion of t h e i r income than do ru r a l households , r ap id u rb a ni za ti oncould have a pos i t ive in f luence on th e n at io na l savings r a t e .

The shor t - run depress ing i n f luence of a highe r burden of dependency on savings and inves tment in ' the h igher f e r t i l i t y popul a t i on i s exacerba ted in th e middle- run by a highe r growth r a t eo f the la bo r fo rc e. The popula t ion with th e highe r r a t e o f l aborfo rce growth wi l l f ind it more d i f f i c u l t to increase th e perworker p ro d uc tiv it y o f i t s economy. This d i f f i cu l t y wi l l be e s pec ia l ly severe in the na t i on ' s urban areas , where high l eve l s


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- 15 -

o f ru ra l- urb an migrat ion reduce th e per cap i t a endowment o f capi t a l and soc i a l i n f r a s t ruc tu re in c i t i e s and co ntr ib ute to highr a t e s o f unemployment and underemployment .

Growing urban unemployment and underemployment in t oday ' sl e s s developed coun t r i e s have sharply underscored th e u rgen t needfo r an e f f i c i e n t and equi tab le a l loca t ion of human re so urc es b etween th e urban and r u r a l s ec to r s of na t iona l economies. The determinants o f ru ra l -u rban migrat ion and th e consequences o f suchmigrat ion fo r economic development warrant ca re fu l s tudy. An im-por t an t cont r ibut ion to such study can come from improved derno-economic models o f dua l i s t i c development.


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A THREE-SECTOR MACRO-MODEL OF THE MEXICAN ECONOMy 2In b u i l d i n g a macrodemoeconomic model o f Mexican develop

ment, one must keep i n mind t h e need f o r a framework t h a t i scomprehensive enough t o d e p i c t t h e i n t e r r e l a t i o n s h i p s and feedbacks o f economic and demographic v a r i a b l e s i d e n t i f i e d with t h eprocess o f development. This p r e s e n t s a t r a d e - o f f between t h el e v e l o f aggregat ion and t h e f e a s i b i l i t y of e m p i r i c a l implement a t i o n . The model d e s c r i b e d below i s a t h r e e - s e c t o r model t h a tprovides a g e n e r a l dynamic f ramework i n which t h e n e t outcomeso f opposing f o r c e s , genera ted by u r b a n i z a t i o n and development canb a s s e s s e d .

In l i g h t o f t h e s c a r c i t y o f c o n s i s t e n t t ime s e r i e s d a t a f o rmost o f t h e v a r i a b l e s t o be considered [ S o l i s (1970a)] , t h e poss i b i l i t y of c a rr y in g o u t an econometric e s t i m a t i o n o f t h e modeli s very s m a l l . Therefore , we a r e planning t o fol low a r e c e n tt r e n d i n economic modeling [see Pindyck and Rubinfeld (1976),pp.332-334; Simon (1976); Kelley and Williamson (1974); Yap(1976)] . This t r e n d embodies:

o t h e formulat ion o f t h e model 's s t r u c t u r e by means o fa s e t o f e q u a t i o ns , i n cl u di n g a l l those elements o feconomic theory t h a t a r e r e l e v a n t f o r t h e unders tanding of economic growth and s t r u c t u r a l changes;

o t h e adoption o f a s e t o f i n i t i a l c o n d i t i o n s and p a r a meters , based on h i s t o r i c a l records o r p o i n t e s t i m a t e st h a t must be s u p p l i e d f o r t h e o p e r a t i o n o f t h e model;

o t h e use o f computer s i m u l a t i o n techniques t o g e n e r a t eannual r e s u l t s ;

o t h e e v a lu a t i o n o f t h e model by a comparison o f t h ebehavior o f i t s p r i n c i p a l v a r ia b l e s a g a i n s t t h e h i s t o r i c a l record;

2The model o u t l i n e d i n t h i s s e c t i o n i s a p r e li m i n ar y v e r s io n o fone t h a t has been informal ly d i s c u s s e d a t s t a f f meetings i n t h eHuman Set t lements and S e r v i c e s Area a t IIASA and whose s t r u c t u r a l b a s i s was f i r s t p r e s e n t e d a t a Mexican Task Force Meetingheld a t IIASA on May 16-19, 1978 [Colosio (1978a)] . I t w i l l u l t i m a t e l y be published as p a r t o f a d o c t o r a l d i s s e r t a t i o n c u r r e n t l y being w r i t t e n by Colosio a t t h e I n s t i t u t e .


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o th e assessment o f th e impacts o f changes in pa r t i cu l a rva r i ab l e s and parameters on demoeconomic development ,e va lu at in g th e r e su l t s wi th in th e ove r a l l gene r a lframework ( i . e . , counte r f a c t ua l ana l y s i s ) .

Product ionThe model cons i s t s o f th re e s ec to rs t h a t d i f f e r in f a c t o r

use , t e chn i ca l chanqe, and o rqan i za t i on o f th e means o f product i on . Since th e purpose o f t h i s ana lys i s i s to cap tu re th e mainmacrodemoeconomic e f f e c t s o f th e urban iza t ion process in Mexico,we emphasize a ru ra l -u rban dichotomy. Moreover , in urban a r ea sth e economy i s s p l i t i n to two sec to r s : modern and t r ad i t i ona l .The modern- indus t r i a l sec to r i s composed mainly o f la rg e s ca l ef i rms whose outpu t can be consumed and/or i nves t ed . These a regenera l ly cons idered to be manufac tur ing ( inc lud ing s ta te -owneden t e rp r i s e s ) ; c ap i t a l i nt en s iv e s er vic es ( e .g . , supermarke t s ,car-wash es tab l i shments , computer ized s e rv i c e s , bank ing , e t c . ) ;t r anspor t a t i on ; energy and cons t r uc t i on [Unikel (1976) .

Since one o f th e i n t e r e s t i ng fea tu res o f development i s th eimpact o f v a r ia t io n s in f a c to r sha re s on incomes, and t h i s int u rn i s poss ib le only w ith a non-un i t a ry e l a s t i c i t y o f s ubs t i t u t i on , we pos tu l a t e a CES p ro du ct io n f un ct io n fo r th e modern- indu s t r i a l sec to r . This gives us a range o f e l a s t i c i t y va luesamong which i s th e un i t a ry e l a s t i c i t y . Thus, 3

( 1 )

3The fo l lowing no ta t ion i s adopted:Subscr ip t 1 deno tes modern- indus t r i a l s ec to r ,Subsc r ip t 2 deno tes a g r ic u lt u ra l s e c to r ,'SUbscr ip t 3 d en ote s in fo rma l se rv ice s ec to r .


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where

G1 (t) = ou tpu t o f modern- indus t r i a l s ec to r ;o = d i s t r i bu t i on parameter ;p = subs t i t u t i on parameter , where p = 1-0 11 and 01

i s th e e l a s t i c i t y o f subs t i t u t i on in th e i ndus t r i a ls ec to r ;

AK,A L = t echnologica l parameters ;uK1 ( t) = cap i t a l inpu t in th e i ndus t r i a l sec tor a t t ime t;L1 ( t) = labo r inp ut in th e i ndus t r i a l sec tor a t t ime t.

This s e c t o r ' s main cha rac t e r i s t c s a re : l im ited pos s ib i l i t i e s fo r f a c to r subs t i t u t i on [Colosio (1978b)] and l abor savingtechnology [ st ra ssmann ( 1968) ]. Therefore :

o < 01 < 1In add i t ion to these te ch n ic al a sp ec ts , th e re a re i n s t i t u ~

t i ona l fac tors ( e .g . , a f ixed minimum wage in th e i ndus t r i a lsec to r ) t h a t r e s t r i c t t he mod er n- in d us tr ia l sec to r ' s capac i tyfo r absorbing a fas t -growing urban l abor fo rce . This has hadth e i nev i t ab l e consequence o f crea t ing a cons iderab le pool o funemployed, and/or underemployed, l abor [ I s b i s t e r (1971)] . Inour s imulat ion model o f th e Mexican economy, we do not cons ideropen unemployment; however, we do account fo r the ex is tence o fan in formal se rv ice s ec to r .

The s t ruc tu re o f the se rv ice sec tor i s charac te r i zed byeasy en t rance , low produc t iv i ty l eve l s , re la t ive ly low cap i t a lin t ens i ty , and little t echno log ica l change [Mazurndar (1976)] .I t s ou tpu t i s en t i r e ly consumed in urban a rea s . Thus, viewing


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l a b o r as t h e only i n p u t , we p o s t u l a t e t h e fo l lowing s imple p r o d u c t i o n f u n c t i o n :

(2)

where

G3 ( t ) = o u t p u t o f t h e informal s e r v i c e s e c t o r ;B3 ( t ) - l a b o r force underemployed;

~ ( t ) = p r o d u c t i v i t y o f underemployed l a b o r .

The r a t e o f change i n p r o d u c ti v i t y i s assumed t o be low,b u t p o s i t i v e , over tim e. Changes i n t h e p r o d u c t i v i t y o f t h e i n formal s e c t o r a r e determined by t h e formal s e c t o r , i n a mannerd e s c r i b e d below [Weber (1975)] .

I n t h i s p r e l i m i n a r y v e r s i o n o f t h e model , a g r i c u l t u r e i sc o n s i d e r e d a s a s in g l e s e c to r, whose o u t p u t i s d e s t i n e d f o r f i n a lconsumption. ' Thus, it r e p r e s e n t s a mixture o f r e l a t i v e l y c a p i t a l i n t e n s i v e i r r i g a t e d a g r i c u l t u r e (such a s e x i s t s i n n o r t h e r nMexico) and l a b o r i n t e n s i v e r a i n - fe d a g r i c u l t u r e , i n which p r o d u c t i v i t y p e r worker i s much lower (such a s e x i s t s i n much o fc e n t r a l and southern Mexico). T h e r e f o r e , t h e p r o d u c t i o n r e l a t i o n s a r e expressed a s :

(3)

where

G2 ( t ) = o u t p u t o f t h e a g r i c u l t u r a l s e c t o r ;e = d i s t r i b u t i o n parameter ;


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v = s u b s t i t u t i o n parameter , where v = 1-0'2 and 0'2i s t h e e l a s t i c i t y o f s u b s t i t u t i o n i n t h e a g r i c u l -t u r a l s e c t o r .

AK,A L = t e c h n o l o g i c a l parameters;K2 {t) = c a p i t a l i n p u t s i n t h e a g r i c u l t u r a l s e c t o r a t t imet ;L3 {t) = l a b o r i n p u t s i n t h e a g r i c u l t u r a l s e c t o r a t t ime t.

Labor MarketsIn t h e i n i t i a l design s t a g e o f t h e model, we assume a homo

geneous l a b o r f o rc e . This assumption w i l l be r e l a x e d a t a l a t e rs t a g e t o al low f o r d i f f e r e n c e s i n s k i l l s .

The t o t a l l a b o r f o rc e i n t h e economy, L { t ) , i s e q u a l t o t h esum o f l a b o r i n t h e t h r e e s e c t o rs . Thus,

(4)

Growth o f t h e t o t a l l a b o r f o r c e over t ime i s g iv en e xo ge no us ly :

L1 ( t) L2 ( t ) L3 ( t)L{t) + n 2 L{t) + n 3 L{t) (5)

where t h e d o t denotes a t ime d e r i v a t i v e . The r a t e o f l a b o r f o r c ei n c r e a s e i n i n d u s t r y , i n t h e informal s e c t o r , and i n a g r i c u l t u r ea r e r e p r e s e n t e d by n 1 , n 2 , and n3 , r e s p e c t i v e l y . These could bec o n s i d e r e d as being d e r i v e d from d a t a on t h e n a t u r a l i n c r e a s e o ft h e p o p u l a t i o n and on l a b o r f o r c e p a r t i c i p a t i o n [Yotopoulus andNugent (1976) ] .


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We assume t h a t n 2 > n 1 and t h a t n 3 t akes on a value b e tween n 1 and n 2 " This r e f l e c t s the f a c t t h a t workers in the in formal sec to r , by being underemployed, have no t had th e opportun ity to exper ience a complete t ransformat ion of t h e i r a t t i t udesfrom t r a d i t i ona l to modern [Gi lbe r t (1976)]"

Demand fo r labo r in th e agr i cu l tu ra l sec to r i s assumed to bea der ived funct ion:

(6)

where

W2 (t) = wage r a t e in th e agr i cu l tu ra l sec to r ;P2( t ) = e x ~ g e n o u s l ~ det ermi ned t erms o f trade between ~ g r i -

cu l t u re and i n d ~ s t r y .

Because of i n s t i t u t i ona l f a c to r s and n atio na l s o cia l governmental po l i c i e s in Mexico, it i s not unreasonable to assume a r i g id downward manufacturing wage r a t e . Therefore , we assume an exogenously-given wage f or th e mod er n- in du stria l s ec t o r , which i s s e tabove th e compet i t ive l eve l . Thus,

where

W1 ( t ) (7 )

W1 ( t) = wage ra te in the i ndus t r i a l s ec t o r , given in termsof the i ndus t r i a l good;


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Equa t ion 7 impl ies t h a t the re wi l l never be excess demandfo r l abo r a t th e cu r ren t minimum wage. At every po in t in t ime,th i s minimum wage wi l l cause a l eve l o f employment in th e manu-fa ctu rin g s ec to r to f a l l below t h a t which would preva i l in com-pe t i t i v e s i tua t ions .

The urban lab or fo rce t h a t i s no t employed in th e manufac-tu r ing sec to r i s cons idered to be surp lus and i s a l loca t ed toth e informal s ec to r . A s ign i f i can t share o f l abor in t h i s sec to r i s underemployed. Thus,

L3 ( t) = L ( t ) - L1 ( t) - L2 ( t ) ( 8)

Before determininq th e waqe r a t e , we propose th e fo l lowinghypo thes i s . The produc t iv i ty of a worker in the in formal s e r -

J

v ices s ec to r i s th e same no mat te r where i s h is l oca t ion . How-ever , the pr i ce of the se rv ice i s no t independent o f lo ca t io n.It i s th e number o f jo b-see ke rs in Mexico Ci ty , fo r example,t h a t se t s th e p ric e d if fe ren ce with re spec t to o the r cen te rs o fth e world . The consumer t he r e has plenty o f choice and can"barga in" th e pr ice down. Thus, we assume t h a t th e wage o f anemployee in th e in formal s ec to r i s i nverse ly re la ted to th e num-ber of workers and d i r ec t ly r e l a t ed to th e demand fo r the s e r vice .

According to Equat ion 2, average and marginal products coinc ide and are given by a. "(:t). I f we equa te the wage r a t e W2 ( t)to th e average (= marginal ) product , we have t h a t

(9 )


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- 23

where

W3 ( t) = wage r a t e in th e informal sec tor ;P3 ( t) = terms .. ()f t rade be.tween th e in formal sec to r and the

r e s t - ~ ( ) f th e e ~ o n o m Y . as given by:

But , observe t h a t (9) a l so can be wri t ten as

(10)

Fur thermore , s in ce labor in th e informal sec tor i s underemployed,we may assume t h a t demand fo r i t s outpu t i s alw ays m et; t he re fo re

(11 )

where

031 ( t) = demand fo r se rv ices 6 r ig lna t ing in the i ndus t r i a lsec tor ;

33( t ) = demand fo r se rv ices or ig ina t ing-wi th in th e sames ec to r .


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We assume, fo r the t ime being , t h a t a c on sta nt p ort io n o fincome from each urban sec to r i s des t ined to th e consumption o fse rv ices - [Mazumdar (1975)] . Therefore ,

t he re fo re

o r

So t h a t

where

f3 =LL\\1-T"j

(12 )


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Observe t h a t p r o d u c t i v i t y in t h e . formal s e c t o r , a.(t) i s d i -r e c t l y ' r e l a t e d t o . t h e marginal p r o p e n s i t y t o consume and t o i n -come i n o t h e r s e c t o r s . At t h e same t i m e , it i s i n v e r s e l y r e l a t e dt o t h e amount o f workers employed i n t h e s e c t o r . These a s p e c t sseem t o be g e n e r a l l y viewed a s t h e main d e t e r m i n a n t s o f p r o d u c t i v -i t y i n t h e informal s e c t o r s [Rempel and Lobdel l (1977), c h . 5 ] .

Labor Migra t ionThe urban l a b o r f o r c e i s augmented over t i m e , n o t only by

n a t u r a l i n c r e a s e , b u t a l s o by t h e n e t number o f work ers m ig ra -t i n g from r u r a l a r e a s . T h e r e f o r e , if we d e f i n e t o t a l urban l a -bor f o r c e a t t ime t t o be N ( t ) , we have t h a t

N(t) = L1 ( t) + L3 ( t )

and t h e growth o f t h e urban l a b o r f o r c e i s given by,(13 )

where m(t) i s t h e p r o p o r t i o n o f m i g r a t i n g a g r i c u l t u r a l workersM(t) , t o t h e t o t a l a g r i c u l t u r a l l a b o r f o r c e L2 ( t ) :

m(t) = M(t)L2 ( t ) (14 )

The s p e c i f i c a t i o n of t h e m i g r a t i o n f u n c t i o n i s one o f t h eelements t h a t deserves a more d e t a i l e d a n a l y s i s . For t h e t imebeing t h e s p e c i f i c a t i o n of t h e m i g r a t i o n f u n c t i o n i s made i n ag e n e r a l form. However, i n t h e f u t u r e , we s h a l l adopt a v e r s i o n


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o f the Todaro hypothesis [Harr i s and Todaro (1970)] t h a t viewsmigrat ion as a funct ion o f the d i f fe rence between expected urbanr e a l wages and agr i cu l t u ra l r e a l wages. For the moment, we con-s i de r expected urban r e a l wages, W(t) , to be the weighted aver -age o f i ndu s t r i a l wages and in formal se rv ices wag es, where th eweights are th e respec t ive propor t ions o f urban l abor force em-p l oyed i n each sec to r :

w1 ( t) L 1 ( t) + W2 ( t) L2 ( t)N(t) (15 )

In t h i s ca se , the migra t ion funct ion can be expressed as

( 16)

Not ice t h a t Equat ion 16 i s genera l enough to inc lude any kindo f ~ c o s t ( t r a ~ s p o r t a t i o n ; psychic , e tc . ) r e l a t ed to th e m ig ra tio nprocess . Migrat ion in t h i s model i s a s ign o f d i sequ i l ib r iumin th e l abor market . At equ i l ib r ium

arid" ne t m i g r a 1 ; { ~ " ~ _ - i s zero .Cap i t a l Markets

The s tocks o f cap i t a l in both th e a griCU ltu ra l and m o d e r n ~i ndus t r i a l sec to rs are assumed to be augmented by pr iva t e andpUbl ic inves tment . Thus,

Kj ( t) = K1j (t) + K2j ( t) + K4j ( t) j = 1,2 (17 )


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where K . . ( t) i s th e s tock o f cap i t a l in s ec to r j , owned by cap i 1Jt a l i s t s o f s ec to r i, and where th e subsc r i p t 4 denotes govern-ment.

Capi t a l accumulat ion i s given by

j = 1 ,2 (18 )

.where Kj i s ne t inves tment , I j ( t ) i t o t a l gross inves tment andK i s th e r a t e of deprec ia t ion (assumed to be cons tan t and i d en t i c a l in both sec to r s ) .

It i s assumed t h a t a por t ion of the income o f both cap i t a l i s t s and workers in the ag r i cu l t u r a l and modern- indus t r i a l sec t o r s i s a l loca ted to sav ings . Thus,

S';: ( t) c Y';:(t)s .J J Jj = 1 ,2 (19 )

S ~ ( t ) 1 Y ~ ( t )s .J J J

where S?( t ) and S ~ ( t ) are t o t a l savings from cap i t a l i s t s andJ Jworkers of sec to r j ; s7 and s a re the margina l propens i t i e s toJ Jsave . Incomes accruing to both c ap i t a l i s t s and workers a re a s sumed to be ne t o f taxes .

Although th e income o f workers has been dete rmined, th e in comes o f cap i t a l i s t s remain to be def ined. Assuming maximizingbehav io r , we may express th ese a s

Y ~ ( t )1 (20)


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Equat ion 20 impl ies t h a t t echnica l progress occurs equally_ toc ap i t a l in both sec to r s . Returns to cap i t a l in ag r i cu l t u r e andindust ry a re denoted by r i ( t ) . Under compet i t ive c i rcumstancesthese r e tu rns should be equa l to the marginal produc t iv i t y o fcap i t a l in each sec to r . That i s ,

(21)

i = 1 ,2

The process by which savings a re a llo ca te d to e i th e r s ec to rhas long a t t r ac t ed th e a t t en t i on of economists [Kel ley , e t a l .(1972)]. S ince Mexican cap i t a l markets bear a considerable de-gree o f imp erfe ctio n [So l i s (1970b)] , it i s no t reasonable toadopt a purely neoc la s s i c a l mechanism. Ins tead we pos i t an a l -l oca t ion process t h a t i s a mixture o f e x ~ g e n o u s and market-guideddec i s ions [Yap (1976a)}. ,Then,

I P. ( t ) = T S ( t )J j j = 1 ,2 ( 22)

Pwhere I . ( t) i s th e amount o f pr iva t e savings in ves ted in th eJs ec to r o f or ig in j, whi le 1; i s a parameter . Sj ( t) i s th e sumo f th e sav ings of cap i t a l i s t s and workers in sec tor j . The re -

Rmaining savings , S. ( t ) , a re a l loca ted to agr i cu l t u re and to in -Jdus t ry accord ing to th e cur ren t d i f f e r en t i a l in r a t e s o f re tu rn .


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Thus,-n 1 (r* (t) if r* 0

i ( t) I ~ R ( t )= =S ~ ( t )1 i f r* < 0

(23)

-n2 (r* (t)if r * 0

i ~ ( t )IPR(t )2= =S ~ ( t )

1 if r* > 0

where i i s t h e p r o p o r t i o n o f t o t a l r e s i d u a l s a v i n g s S ~ ( t ) , i n -J Jv e s t e d i n t h e same s e c t o r I ~ R , and r * ( t ) = ( r 2 ( t ) - r 1 ( t ) .

Governmentai revenues,G 4 ( t ) , a r e d i r e c t e d toward t h e p r o v i s ion o f pUbl ic goods, P ( t ) , a n d p u b l i c inves tment , 1 4 ( t ) . T o t a le x p e n d i t u r e on p u b l i c goods i s a f u n c t i o n o f t o t a l l a b o r f o r c ei n both urban and' r u r a l a r e a s :

(24)

P h y s i c a l investment i s a f u n c ti o n o f p o p u l a ti o n c o n c e n t r a t i o n and p r i v a t e investment :

(25 )


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The remaining por t ion i s cons idered to be a r e s i dua l :

(26 )

This r e s idua l i s a l loca ted to agr i cu l tu r e and tfie ' :l1odern-industrial sec tors a's "fol lows:

(27)

and

(28)

The model presented so f a r , emphasizes th e supply aspec t so f the economy. The model can be expanded in a t l e a s t two use-fu l ways. F i r s t , demand func t ions fo r f i n a l products can bespec i f i ed fo r workers and fo r cap i t a l i s t s [Kel ley e t a l . (1972);Lluch e t a l . (1977)] . Second, in order to inc rease rea l i sm, in -t e rna t i ona l t rade must be cons idered in any demoeconomic ana lys i so f th e Mexican economy. Both extens ions are cur r en t ly underway.


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CONCLUSION

Schola rs an d p o l i c y m a k e r s of ten d isagree when it c o me s toeva lua t ing th e de s i r ab i l i t y o f cur ren t r a t e s o f rap id urban iza t ion a n d m a s s i v e ru ra l -u rban migra t ion in th e l e s s d e v e l o p e dw o r l d . Some see t h e s e t r ends as e f fec t i ve ly speed ing up na t iona l processe s o f s o c i o e c o n o m i c d e v e l o p m e n t , w h e r e a s o the r s bel i eve t h e i r c o n s e q u e n c e s to b e l a rge ly undes i rab le a n d a r g u et h a t both t r ends s h o u l d b e s l o w e d d o wn .

T h o s e t ak ing th e negat ive v i e w a r g u e t h a t m o s t d e v e l o p i n gcoun t r i e s a re "over-urbanized" in the sense t h a t u r b a n g r o w t hr a t e s h a v e grea t ly ou td i s tanced r a t e s o f i ndu s t r i a l d e v e l o p m e n ta n d e c o n o m i c g r o w t h . T h i s h a s crea ted a n i m b a l a n c e t h a t f indsc i t i e s in th e l e s s d e v e l o p e d w o r l d p e rp e tu a ll y s tr u g g li n g withc r i s i s . Despi te s ubs t a n t i a l ga ins in i ndu s t r i a l produc t ion ,new jobs do not a p p e a r a t a n y w h e r e near th e r a t e s r equ i red toe m p l o y a s i gn i f i c an t p ort ion o f th e g r o w i n g u r b a n lab or fo rce .De sp ite imp re ss iv e i m p r o v e m e n t s in u r b a n housing , f o o d ava i l ab i l i t y , educa t iona l s e rv i c e s , an d t r anspor t a t i on f a c i l i t i e s - squa t t e r se t t l emen ts p ro l i f e r a t e , h u n g e r a n d i l l i t e r a cy a re ine v i d e n c e e v e r y w h e r e , an d t r a f f i c conges t ion i s w o r s e than befo re .An d , m o s t impor tan t ly , r esources t h a t c o u l d o therwise b e app l iedto more d i r ec t ly a n d i m m e d i a t e l y p ro du ctiv e u se s i n s t ead m u s t b ed iv er te d to sa t i s fy th e ever g r o w i n g demands fo r u r b a n soc i a lse rv i ce s a n d i n f r a s t r u c t u r e .

Suppor te rs o f cu r ren t urban iza t ion a n d migra t ion pa t t e rnsin develop ing c ou ntr ie s p oin t to th e m o d e r n i z i n g benef i t s o furban iza t ion an d to th e i m p r o v e d wel l -be ing o f m o s t ru ra l -u rbanmigran t s . T h e y c o n t e n d t h a t urban iza t ion t r ans fo rms peop le ' sout look a n d behav io ra l pa t t e rns , w h i l e b r o a d e n i n g t h e ir s k i l l sa n d fos t e r ing in t h e m th e grea t e r a c c e p t a n c e o f i nnova t ions a n dr a t i ona l i t y necessary fo r gene ra t ing sus ta ined weal th a n d p o w e rin a m o d e r n soc ie ty . T h e y also a r g u e t h a t c o n c e r n o n welfa reg r o u n d s i s p r o b a b l y misp laced , b e c a u s e desp i t e job i n s ecur i t ya n d squa l id l iv ing cond i t ions m o s t ru ra l -u rban migrants a re be t t e r o f f than t h e y w e r e p r i o r to t h e i r mo v e . The i r t r an s f e r f r o m


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th e farm to th e c i ty enables them to r a i s e t h e i r persona l in come and to ob ta in soc i a l se rv ic es o f a much wider va r i e t y andsuper io r qua l i t y than were ava i l ab l e to them before .

As recent ly as two decad es ag o, i ndus t r i a l i za t ion and u r ban iza t ion were seen to be th e main s t r u c t u r a l changes t h a t acount ry had to undergo in order to ach ieve des i rab le l eve l s o fwelfa re . This not ion was in t roduced as a core element in seve r a l well-known t heo re t i ca l formula t ions o f economic development [Lewis (1954); Fei and Ranis (1961); Jorgenson (1961)] andwas cons idered to be a necessary c on dit io n fo r economic growthand moderniza t ion. The argument r e f l ec t ed th e h i s to r i c a l obse rva t ion t h a t in cre ases in per cap i t a income hav e been th e r e s u l t o f sub s t an t i a l growth in th e ava i l ab l e s tocks o f f ac to r sof produc t ion ( labor , cap i t a l , and na tu ra l resources) and o fth e adopt ion of revolu t ionary t e chn ica l improvements [Kuznets(1966)] .

In ca se s where economic systems a re composed o f sec torscharac te r ized by marked d i f f e r en t i a l s in f ac to r endowments (bothquan t i t a t i ve and qua l i t a t i v e ) , major va r i a t i ons in r esource a l loca t ion genera l ly produce a s h i f t o f fac to rs from th e l e s s toth e more product ive s ec to r s . His to r i ca l l y , t h i s s h i f t has t akenp lace from ag r i cu l t u r a l t o n o n -a g ri cu lt ur al ac t i v i t i e s , and th emost widely documented fac tor movement i s t h a t o f l abor . Thishas had th e par t i cu la r impact o f r a i s i ng th e e ff ic ie n cy l eve lin the p ro du ctio n o f food, c rea t ing an ag r i cu l t u r a l surp lus t h a tt oge the r with th e re le ase d l abor , has prov id ed th e bas i s fo r in dus t r i a l i za t ion and urbaniza t ion . The ag r i cu l t u r a l su rp lus canbe t r ans f e r r ed to th e i ndus t r i a l sec tor e i t h e r d i r ec t ly fo r th esa t i s f ac t ion o f in te rm e dia te and/or f i n a l demands, o r i nd i r ec t lythrough t axes , savings , and ea rn in gs o ut o f expor t ac t i v i t i e s ;a t th e same t ime , popula t ion t r ans fe r s meet th e i ndus t r i a l sec to r ' s demand fo r l abor . In t h i s r egard K ey fitz o b se rv es t h a t :

Al l u rb an iz at io n depends on su f f i c i en t produc t iv i tyin a g ric u ltu re to c rea te a food su rp lus above th e needsof producers and the means to t r anspor t t h a t su rp lus ...Seen from one po in t o f view, th e coun t ry - s ide provides a


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market fo r th e d ispo sa l o f c i ty produc ts ; ' from ano the rpo in t o f view it becomes r i che r by se l l i ng its produc t sin th e c i t y . But s ince the demand fo r food i s l e s s e l -a s t i c than t h a t fo r manufac ture , a smal le r and smal le rp ropor t ion o f l abor comes to be t i ed up in th e produc-t ion o f food and l a rge r propor t ions can be re leased fo ri ndus t ry . [Keyf i tz (1977) p .146] .

Urbaniza t ion was looked ~ p o n as one o f th e bas i c aspec t s o feconomic development , and its ro l e in de te rmining th e wel lbe ingo f so cie ty was h ar dly q u es tio n ed . Moreover, because of the e c o n ~omic b e ne fi ts r ef le c te d in produc t iv i ty ga ins (as a r e s u l t o fr u r a l ~ u r b a n movements o f l abor) it was al leged t h a t urbaniza t ionhad th e pa r t i cu l a r ly bene f i c i a l e f f e c t o f modernizing t r a d i t i ona ldemographic, po l i t i c a l , and socioeconomic behav io r . Thus govern-ments concerned with th e e ra dic at io n o f pover ty fos te red po l i c i e sor ien ted toward i nc reas ing cap i t a l format ion , i ndu s t r i a l i z a t i on ,and urbaniza t ion as a means o f t r ig g er in g th e mechanisms o f econ-omic progres s . As a r e su l t , a number o f coun t r i e s have evolvedrom predominant ly ag r i cu l t u r a l to more i ndu s t r i a l i z ed economies ,with an ev iden t t ransformat ion in th e spa t i a l ~ t r u c t u r e o f demo-economic ac t i v i t y becoming manifes ted in a sub s t an t i a l i nc reasein urban iza t ion l eve l s .

The co s t has been high however . An i nc reas ing number o fscho la rs [Morawetz (1974); Sethurman (1970); Souza and Tokman(1976); and Todaro (1976)] see cu r ren t r a t e s o f u rb an iz at io n indeveloping coun t r i e s as a t h rea ten ing phenomenon. Contra ry tot h eo r e t i c a l expec ta t ions , l abor t r an s f e r s from r u r a l to urbana reas are exceeding th e i ndu s t r i a l s e c t o r ' s ab i l i t y to absorbth e i nc reas ing urban l abor fo rce . This l eads to urban unemploy-ment and /o r underemployment, and to a pro l i f e r a t ion o f pe t ty s e r -v ice ac t i v i t i e s . The argument , based on these obse rva t ions , i st h a t th e p op ula tio n o f th e Third World has become premature lyurbanized , in th e sense t h a t the percentage o f people l i v ing inth e c i t i e s i s grea t e r than th e cu r ren t s tage of development cansuppor t . The in te rp lay o f unprecedentedly high l eve l s o f na tu r -a l i nc rease along with th e primary economic goa l o f rap id indus -t r i a l i z a t i on , ha s p ro du ce d, it i s argued, th e unique pa t t e rn o f


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"over-urbanizat ion" disp layed by the major i ty o f Third Worldcoun t r i e s . By no t being ga in fu l ly employed in i ndu s t r i a l a c t i v i t i e s , l a rge por t ions o f the urban popula t ion pre sen t an ob-s t a c l e to economic development . They are forced to engage inlow-produc t iv i ty t er ti ar y a c t iv i ti es and a re subjec ted to marg ina l i za t i on . In t h i s way, the expected changes in consumptionwork, and demographic behavior , which are be l ieved to be theoutcome of urbaniza t ion and necessary fo r th e "mo dern iza t ion"process , are d elay ed . Furtherm ore , t h i s l a rge p op ula tio n o fthe urban underemployed impose s an add i t i ona l obs t a c l e to development , to the ex ten t t h a t soc ie ty i s forced to provide l a r -ger amounts of urban s o cia l i n fr a st ru c tu r e and s e rv i c e s a t th e expense o f d i r ec t ly product ive pub l i c inves tments . Therefo re , urbani za t i on as experienced by contemporary developing coun t r i e s , shouldno t be equated wi th development; on th e c on tr ar y, it should be view- -ed as a major bot t leneck con t r ibu t ing to the pe r s i s t ence o f u n d e r ~development .

Although va l i d , the above observat ions have of t en been th econclus ions of pa r t i a l ana lyses , in which the growth of t e r t i a rys ec to r s have occasional ly been ind iscr iminant ly equated with th egrowth of p et ty s erv ic es , with no d i s t i nc t i on be ing made to d is t i ngu i sh between the growth of soc i a l l y des i rab le and undes i r ab le se rv ices . Moreover, they have fa i l ed to ana lyze what peop le now employed in pe t ty se rv ice ac t i v i t i e s would be doingo therwise . Only recent ly have analyses o f the income gains andass imi la t ion exper iences o f migrants in urban l abor marke t s beenca r r i ed ou t . yap, fo r example, has shown fo r th e B ra zi l ia n caset h a t s i gn i f i c an t improvements in income l eve l s have occurred fo ri nd iv id u a l r ur al -u rb a n migrants , despi te t h e i r underemployeds t a t u s , when t h e i r ne t urban e arn in gs a re compared with those oft h e i r non-migrant coun te rpar t s [Yap (197Gb)].

I t i s ev iden t from the arguments presented above, t h a t onlya genera l dynamic framework t h a t as ses ses the ne t outcomes ofopposing f or ce s g en er ate d by urbaniza t ion and development canlead to a comprehensive and systemic evaluat ion o f th e i n t e r r e l a t i onsh ips and feedbacks among economic and demographic va r i ab les in the process of development .


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The model p r e s e n t e d i n t h e preceeding s e c t i o n should pro-vide a s u i t a b l e framework f o r t h e a n a l y s i s and unders tanding o fu r b a n i z a t i o n and economic development p a t t e r n s i n ~ 1 e x i c o . Bymeans o f s i m u l a t i o n t e c h n i q u e s we p l a n t o e x p l o r e two impor tanta s p e c t s o f t h i s h i s t o r i c a l phenomenon. F i r s t , we s h a l l measuret h e r e l i a b i l i t y o f t h e modeling e f f o r t by t e s t i n g i t s a b i l i t yt o r e p l i c a t e t h e p a t t e r n s o f Mexican demoeconomic growth f o r t h ep e r i o d 1940 t o 1970. This t e s t w i l l compare t h e growth behaviord i s p l a y e d by c e r t a i n v a r i a b l e s o f t h e model w i t h h i s t o r i c a l exp e r i e n c e . Second, t h e s i m u l a t i o n process w i l l o f f e r t h e p o s s i b i l i t y o f i d e n t i f y i n g t h e impacts o f d i f f e r e n t s o c ia l p o l i c i e s onMexican growth and u r b a n i z a t i o n . This w i l l be done by a l t e r i n gkey v a r i a b l e s o r p ar ame te rs , w ith ou t a r e s o r t t o p a r t i a l a n a l y s i s .

In a s e n s e , t h e model w i l l provide us w i t h a " l a b o r a t o r y " ,i n which t e s t s w i l l be performed i n o r d e r t o l e a r n what wouldhave h appened if p o l i c i e s had been d i f f e r e n t from what t h e y wereh i s t o r i c a l l y . Examples such as t h e fol lowing come t o mind:

o What would have been t h e e f f e c t s on u r b a n i z a t i o n andeconomic growth o f d i f fe r e n t r a t e s o f r u r a l - u r b a n mig r a t i o n ?

o What would have been t h e e f f e c t s on u r b a n i z a t i o n o fd i f f e r e n t r a t e s o f n a t u r a l i n c r e a s e ?

o What would have been t h e e f f e c t s o f d i f f e r e n t l e v e l so f p ri v a t e and p u b l i c investments?

o What would have been t h e e f f e c t s o f d i f f e r e n t product i o n t e c h n o l o g i e s ?

o What would have been- the e f f e c t s o f d i f f e r e n t f i s c a l __p o l i c i e s ?

In s h o r t , a number o f experiments w i l l be performe? usingt h i s model i n o r d e r t o develop a system-wide a n a l y s i s o f d i f f e r e n t p o l i c i e s and t h e i r r e p e r c u s s i o n s on t h e development o f t h eMexican demoeconomy.


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