A farm household in rural Mexico consists of five adult brot

A farm household in rural Mexico consists of five adult brothers and no other dependents. Total annual income depends on the number of brothers working on the farm though the year and is given by the following schedule:

Number of brothers

1

2

3

4

5

Total farm output (in $)

1,000

1,800

2,400

2,800

3,000

Each brother, at the beginning of the year, can decide to migrate to Mexico City, where a typical job, commensurate with his skills, pays $1,300 per annum, but the unemployment rate is as high as 50%. A person who migrates to the city cannot come back and work on the farm that year. Furthermore, all city jobs are temporary one-year appointments. Also assume, for all questions that follow, that the brothers are risk-neutral and there is no difference in the cost of living between the city and the countryside. Now consider three different scenarios:

a) Suppose the family is completely individualist: those brothers who work on the farm share the farm income equally among themselves. There are no remittances to or from any family member who goes to the city. Find the number of brothers who will migrate.

b) Now suppose the family is completely altruistic: the total family income, whether from a city job or from the farm, is pooled and shared equally. How many brothers will this family send off to Mexico City to look for jobs?

C) Here is a third possibility. Those brothers who migrate to the city become selfish and never send home any remittances, even if they are employed (maybe those in the countryside have no way to verify whether their brothers in the city have a job). However, the family sits down and makes the following arrangement: those brothers who try out their luck in the city will each be sent $200 a year from the farm income, to insure against possible joblessness (assume that this contract is always honored). Find how many brothers will decide to migrate. (Assume that if a brother is indifferent between migrating and not migrating, he does migrate.).

D) Compare the numbers in parts (a)-(c). In the light of the comparison, discuss the following assertion: “The extent of rural-urban migration depends, ceteris paribus, on the nature and degree of altruistic links within families.”

Solution

a) the first case being individualistic is not a good idea nd we should not encourge

inorder to have inventions discoveries from some people their families helped them a lot

change is inevitable in this world so we should not opt individualist nature

b) it is the true one for the bright future of family n nation n the world

we should be altruistic and always encourge others to invent and bear some risks in life

as we know fortune favours the brave it is better to send 2 persons to city as 50-50 chance for getting job

atleast if 1 is employed then total amount is 2400 + 1300 = 3700 can be distributed equally where each get an amount of $740 which is more if all work on farming in the country side.

if 2 got jobs then they earn 2400+2600 = 5000 which gives each brother $1000 a more profitble income

if 2 fil to get jobs then 2400 is distributed where every one get 2400/5 =$480 which is better income when all work in country side for $600

if we send 3 members then more risk n profits will be there

1800+3900=5700/5 =1140 for every one

1800+2600=4400/5=880

1800+1300=3100/5=620

1800+0000=1800/5=360 where 900-360 =540

in case of 2 ,800-480=320

low loss is better option to opt..

c) It is not fair one not sharing our income when we earn n asking others when we have trouble.

After comparing all the three The extent of rural urban migration depends on the nature of altruistic links with families

Rather than huge taxes to government nd asking them to create jobs n decrease unemployment its our duty to look after our family members wherever they stay either in country side or in city.

we should be altruistic which is better for the next generation and human relations will flourish n cherish always