MIGRATION AND POLLUTION*

We explore the links between migration of labour and location
specific (urban) pollution, suggesting a sense in which pollution can be
welfare improving. In a conventional Harris-Todaro model of urban-rural
migration, individuals migrate so as to equate the expected urban wage
(given a downward rigid real wage in the urban sector) to the real wage.
Unemployment is endogenously determined. Interpreting unemployment
as damage, urban pollution (damage denoted in units of labour) can also
support the same equilibrium with the value of damage equal to the value
of resources otherwise lost through unemployment. However, if the
damage function implies an uninternalized externality (due to urban
congestion, for instance), an internalization gain can be realized through
the use of a Pigouvian tax (or instrument) that discourages migration.
Thus if pollution is introduced into a Harris-Todaro model with no such
features, environmental damage displaces unemployment to support a
similar outcome. Internalizing the externality then yields a welfare gain.
We characterize the optimal Pigouvian tax in such a case and show that it
is, in general, non-zero. In this sense, then, pollution can be welfare
improving perhaps suggesting an alternative view of congestion and other
adverse environmental effects facing urban dwellers in the developing
world.