Urbanization, population transition, and growth

This paper analyzes a dual economy consisting of urban market areas and less developed rural areas with or without local markets. Urban areas have better opportunities for earnings and education than rural areas. Rural families choose whether to move to urban areas at costs that differ from location to location. As per capita output grows relative to the moving cost, urbanization proceeds, leading to lower fertility, more investments in human and physical capital per child relative to output per worker, and faster economic growth. These impacts are stronger if rural areas have no access to markets.