Todaro elaborated on Lewis’s dualistic labour market to include largescale
urban unemployment and underemployment, making migration endogenous. Surplus rural
labour migrates to the higher-paid urban (modern) sector as long as the expected urban wage is
higher than the rural wage. Equilibrium occurs when expected wages are equalized through
adjustments in unemployment. That is, rural-urban migration continues until unemployment
rises such that the probability of a finding a high-paying job falls enough to equalize expected
urban and rural wages.
Figure 5 depicts the HT model. HH represents a rectangular hyperbola on which the rural
equilibrium wage and employment level lie, for a given modern sector wage and employment
level. Equilibrium may be stated as: