Urban Pollution, Unemployment and National Welfare in a Dualistic Economy

This paper undertakes a comparative static analysis in the Harris-Todaro (H-T) model by accommodating local pollution. Unlike in the classical H-T model where migration proceeds in response to urban-rural differences in expected earnings, we consider labor movement taking place according to the difference in utility, which is influenced by the quality of the local environment. The paradoxical result is that an improvement in pollution-abatement technology gives rise to an increase in urban unemployment and has no effect on the workers' aggregate welfare.