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The article explains the phenomenon of counter‐urbanization, which has become prominent in most developed countries. We develop a model that provides an economic rationalization for the observed willingness of incumbent farmers of a rural region to absorb nonfarmer urban migrants. The analytical findings show that counter‐urbanization increases the region's welfare‐maximizing population, decreases the optimal number of incumbent farmers, and increases the per capita welfare. The empirical results, which are based on data from rural Israel, demonstrate that while the optimal population of farmers decreases slightly, the total optimal population of the region more than triples and farmers' per capita welfare almost doubles.
Feinerman et al. (Fri,) studied this question.