The Impact of Income Distribution and Agricultural Credit Facilities on Rural-Urban Migration

1. Unbalanced rural-urban migration, on the one hand, negatively affects the demographic structure, gender structure, and human resource development; while on the other hand, it affects the process of human capital accumulation in emigrant and immigrant regions. The experience of developing countries has shown that the rapid growth of urban populations is far greater than that of rural areas, and the source of this rapid growth is largely due to the mal performance of macroeconomic budgetary policies and dysfunctional dilemmas with the agricultural and industrial sector activities; hence, in many rural areas of developing countries, rural-to-city migration has caused the rapid destruction of rural economies and the creation of chronic poverty and food insecurity. What is certain is that investing in the agricultural sector, in addition to generating production and employment in this sector, will contribute to the growth of production and employment in other sectors through the earlier and later communications of this sector with other sectors. Given the fact that most agricultural activities are carried out in rural areas, the expansion of investment in this sector creates more job opportunities in rural areas and prevents villagers from migrating to cities. Increasing investment in the agricultural sector, in addition to creating new jobs and reducing the unemployment rate in the country, also increases farmer's incomes, thereby reducing their migration to cities, and improving income distribution. The purpose of this study is to answer the fundamental question whether the adoption of financial policies including government payments and credit facilities in the agricultural sector in Iran during the years 1982-2012 has had a significant effect on the process of rural-urban migration.
2. THEORETICAL FRAMEWORK: Tadaro (1970), like other thinkers of migrations, has been trying to explain the rural-urban migration. The main premise of Todaro model is that each potential immigrant decides to migrate based on the purpose of recording the expected earnings. In this decision, two fundamental economic factors are involved; the first is the actual difference between wages in the city and the villages due to different skills and training periods for workers. The second main element of the model and the most important part, which is not in the other migration patterns from village to city, is the probability of success of every immigrant in obtaining a job in the city. The key for understanding the apparently contradictory phenomenon of continuing immigration to centers, where unemployment is high, is to study the migration process with an expected or permanent income approach in which the expected income also relates to the payment of wages to the urban workers and to the extent it is possible that he can get a job.
3. In this study, the annual data during the period 1982-2012 and the ARDL self-explanatory method have been used to investigate the effect of income distribution and provision of agricultural sector credit facilities on rural-urban migration. For this purpose, an ideal estimation model is defined to investigate the short-term and long-run coefficients of independent variables’ effect on dependent variable. The variables are rural-urban migration rate, agricultural sector credit facilities paid, rural-urban wage ratio, annual precipitation of the rain, and rural Gini coefficient. The source for collecting the data is the Central Bank, the statistical Center of Islamic Republic of Iran, and the annual statistical yearbooks of Management and Planning Organization.
4. The results of estimating the factors affecting the migration of villagers to cities indicate that in the short run, a significant share of the fluctuations of rural migration to cities is attributed to the explanatory variables such as the value added to the agricultural sector, the amount of facilities granted by the banking system to the agricultural sector, the rural-urban wage ratio, and the average rainfall, while the coefficient of determination in the short-run model is 92%. The results showed that the agricultural value added has a positive and significant effect on the migration of villagers to cities. The effect of this variable is greater than the amount of facilities granted to the agricultural sector. It was also found that the proportion of wages in the rural sector to the urban sector had the most important effect on the economic factors affecting the rural population's migration to the cities. The average rainfall in the country as one of the most important factors affecting the improvement and prosperity of agriculture in the short-term is significant with a lag. From the economic point of view, the result is correct because farmers, based on the amount of rainfall in a year, decide on the volume and type of cultivation for the next year, and in fact, the amount of agricultural production of this year is a function of rainfall in the previous year. Moreover, in the long run, the coefficient of the above-mentioned is -0.74.
5. Rural areas of the country have been kept in underdeveloped status for several reasons during the last decades, and problems like poverty, inequality between the city and the countryside, and countless welfare problems for the villagers have been made for villagers. Hence, rural people are ultimately in the process of promoting their livelihoods by going to the country's urban settlements. In Iran, along with the industrialization of cities, the recruitment of young people, in excess of agricultural labor from rural to city, began in favor of industrial and service activities. The amount of facilities granted by the banking system to the agricultural sector, and the number of rural migrants to cities during the period examined have a negative effect both on the short term and the long run, which means that in the short and long term, provision of banking facilities to the agricultural sector has improved the attractiveness of the village and reduced the migration of villagers to cities. The positive effect of the agricultural surplus on the amount of immigration suggests that the increase in value added has led to an increase in the income of the villagers and because of the lack of suitable social facilities in villages, this increase in income encourages villagers to migrate to the cities in order to benefit from facilities available in cities. Based on the findings estimated by the research model and the determination coefficient of 92%, it can be concluded that explanatory variables affecting rural-urban migration are significant in the short term such as value added by the agricultural sector, the banking facilities granted to the agricultural sector, the rural-urban wage ratio, and the average amount of rainfall.