Migration In A Stochastic Environment:An Extension Of The Harris And Todaro Model Based On The Optimal Stopping Theory
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The present paper constructs an extended Harris- Todaro model that incorporates environmental stock, by making use of the optimal stopping theory, to examine the properties of migration in an economy where environment fluctuates stochastically. It is revealed that if uncertainty of environment in the rural area increases, inhabitants in the rural area should stay there longer, while, if the vulnerability of environment in the rural area increases, inhabitants in the rural
area should leave there earlier, where uncertainty and vulnerability are respectively defined as the variance of stochastic fluctuation of environmental stock and the degree of sudden reduction of the environmental stock caused by some shock that happens from time to time.
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