Preference Matching, Income, and Population Distribution in Urban and Adjacent Rural Regions

Batabyal, Amitrajeet and Beladi, Hamid (2018): Preference Matching, Income, and Population Distribution in Urban and Adjacent Rural Regions.

Abstract

We analyze the impact of preference matching and income on the distribution of the population in an aggregate economy consisting of an urban and an adjacent rural region. It costs more (less) to live in the urban (rural) region. Individuals choose freely to live either in the urban or in the rural region. They differ in their incomes. These incomes are uniformly distributed on the unit interval. Our analysis leads to four results. First, when the cost differential parameter satisfies a condition, both regions are occupied in the equilibrium. Second, when this parametric condition holds, in any equilibrium in which the mean income of individuals varies across the two regions, every resident of the rural region has a lower income than every resident of the urban region. Third, there exists an income threshold and all individuals with higher (lower) incomes choose to live in the urban (rural) region. Finally, in the equilibrium with income sorting, it is possible to make everyone better off by slightly modifying their residential choices.

• Item Type: MPRA Paper
• Language: English
• Keywords: Income, Population Distribution, Preference Matching, Rural Region, Urban Region
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O18 - Urban, Rural, Regional, and Transportation Analysis ; Housing ; Infrastructure; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity

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