Inequality, the Urban-Rural Gap and Migration

Using population and product consumption data from the Demographic and Health Surveys I construct comparable measures of inequality and migration for 65 countries, including some of the poorest countries in the world. I find that the urban-rural gap accounts for 40% of mean country inequality and much of its cross-country variation. One out of every four or five individuals raised in rural areas moves to urban areas as a young adult, where they earn much higher incomes than non-migrant rural permanent residents. Equally, one out of every four or five individuals raised in urban areas moves to rural areas as a young adult, where they earn much lower incomes than their non-migrant urban cousins. These flows and relative incomes are suggestive of a world where the population sorts itself geographically on the basis of its human capital and skill. I show that a simple model of this sort explains the urban-rural gap in living standards. Alwyn Young Department of Economics London School of Economics ___________________________ I would like to thank Elhanan Helpman, Ho Veng-Si and anonymous referees for many helpful comments and Measure DHS (www.measuredhs.com) for making their data publicly available.