The AER is celebrating its 100th birthday and identified the most important twenty articles from over that period. Development captured two!
Harris, John R., and Michael P. Todaro.
1970. “Migration, Unemployment and Development: A Two-Sector Analysis.” American Economic Review
, 60(1): 126–42.
This widely cited paper starts with the puzzle that in poor developing countries one observes individuals migrating from agricultural areas to urban areas, even though they would have positive marginal product in agriculture but face a substantial probability of unemployment in the urban area. The first step in the explanation is to note that there are politically determined minimum wages in the urban areas that prevent wages from adjusting to achieve full employment for all those who come to the urban areas. The equilibrium distribution of potential workers between the rural and urban areas equates the marginal product of labor in agriculture to the expected wage in the urban area, i.e., the product of the wage and the probability of employment.
Kuznets, Simon.
1955. “Economic Growth and Income Inequality.” American Economic Review, 45(1): 1–28.
Data from developing economies indicate that the earlier phases of economic development tend to be characterized by increasing income inequality, as those engaged in the small but growing modern sector of the economy pull away from those still left in agriculture and other subsistence activities. The degree of inequality reaches a peak, however, and then diminishes with further development, as the modern sector comes to dominate the economy and perhaps more so if it creates room for redistributive activity. The resulting “Kuznets curve” has been the subject of much empirical research and discussion within development economics.
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