A New Framework of Urban Development Theory: Urban Labour Demand, City Size, and Rural–Urban Migration

Urban labour demand is normally taken as given: the Harris–Todaro model fixes urban employment by a minimum wage and a marginal product condition, leaving the activities that carry most urban employment outside it. This paper derives that demand from the consumption value chain and specifies the corresponding supply side. Embedding this sector into the Harris–Todaro model yields a generalised Harris–Todaro equilibrium and an analytical expression for city population, which—controlling for subsistence cost—rises with consumption value chain depth. The framework yields two testable predictions. The first is that a city's adjustment tail is longer the more of its income the city retains locally, so that the finite-window duration of its response to a traded-sector shock rises with the spectral radius of its consumption kernel conditional on chain length, while the cross-city dispersion of the composite of chain length and spectral radius records how asymmetrically local propagation runs. The second is that the same traded base supports two stable city sizes with very different local service sectors, whenever the outside option is comparable to the manufacturing wage bill. We further show that city size is invariant to the wage structure under the baseline specification, characterise the boundary between a unique and a multiple equilibrium, and reduce feasibility to one scalar condition. The contribution is to endogenise urban labour demand and to provide a closed-form expression for city size. An illustrative cross-city construction, reported in the appendix, shows what a measurement exercise would require.