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Reconsidering the effect of economic development on urban unemployment under non-homothetic preferences

Takeuchi, Nobuyuki (2012): Reconsidering the effect of economic development on urban unemployment under non-homothetic preferences.

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Abstract

We reconsider the effect of economic development on urban unemployment by introducing households with non-homothetic preferences into a sector-specific capital version of the Harris-Todaro model. Contrary to previous studies, this work shows that, while urban development reduces urban unemployment, rural development expands it. As for labor growth, it normally increases urban unemployment.

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