Environment, Urban Unemployment, and Tariffs in the Harris–Todaro Model

• Published date: 01 August 2013
• Date: 01 August 2013
• Author: Azusa Nakamura
• DOI: http://doi.org/10.1111/rode.12052

Environment, Urban Unemployment, and Tariffs in

the Harris–Todaro Model

Azusa Nakamura*

Abstract

By incorporating the environment into the Harris–Todaro model, this paper examines how introduction of

an import tariff on manufactured goods affects urban unemployment and the environment in a less-

developed country. In the Harris–Todaro model, introduction of an import tariff increases urban unem-

ployment when there is no environmental pollution. In contrast, this paper shows that introduction of a

tariff may decrease unemployment if the environment is incorporated into the model. Moreover, it is

shown that introduction of a tariff improves the environment.

1. Introduction

Urban unemployment and poverty are serious issues in less-developed countries

(LDCs), and they are expected to become graver. This is because urban populations,

more significantly, in LDCs are expected to increase. For example, “About 89% of

the total projected urban population growth of 1.8 billion people from 2005 to 2030

will occur in non-OECD countries” (Organisation for Economic Co-operation and

Development (OECD), 2008, p. 108).

Harris and Todaro (1970) is one of the well-known studies of urban unemployment

in LDCs. It focused on the coexistence of rural–urban migration and massive urban

unemployment. Corden and Findlay (1975), Neary (1981), and others have discussed

various aspects of the Harris–Todaro (HT) model in a small open economy using the

standard 2 ×2 model that closely resembles the Heckscher–Ohlin trade model.

Environmental pollution is also a serious problem in LDCs. One of the main envi-

ronmental problems is that industrial pollution reduces output in environmentally

sensitive sectors. In other words, a negative cross-industry externality exists. As a con-

sequence of rapid industrial development, untreated or poorly treated industrial efflu-

ents that contain heavy metals, chemicals, litter, and oil are discharged in many

LDCs, which damage the ecosystem and adversely affect fishery and aquaculture.1

Moreover, using polluted water by industrial effluents for irrigation causes soil pollu-

tion and has adverse effects on agriculture.2Focusing on the negative cross-industry

externality is also important along with the direct effect of pollution on consumer

utility. This is because fall in productivity of environmentally sensitive sectors steadily

threatens the life of people working in these sectors and affects the structure of

economy.

Tawada and Nakamura (2009) focused on the negative cross-industry externality

and unemployment in LDCs. They extended the standard HT model by assuming that

* Nakamura: Faculty of Economics and Information, Gifu Shotoku Gakuen University, 1-38 Nakauzura,

Gifu, 500-8288, Japan. Tel: +81-58-278-0711; Fax: +81-58-278-0718; E-mail: azusa.n@gifu.shotoku.ac.jp. The

author would like to thank Professor Makoto Tawada and two anonymous referees for their helpful com-

ments and suggestions.

Review of Development Economics, 17(3), 585–593, 2013

DOI:10.1111/rode.12052

© 2013 John Wiley & Sons Ltd