The model assumes that unemployment is non-existent in the rural agricultural sector.
It is also assumed that rural agricultural production and the subsequent labor market is perfectly competitive.
The model explains internal migration in China as the regional income gap has been proved to be a primary drive of rural-urban migration, while urban unemployment is local governments' main concern in many cities.
Therefore, migration from rural areas to urban areas will increase if: However, even though this migration creates unemployment and induces informal sector growth, this behavior is economically rational and utility-maximizing in the context of the Harris–Todaro model.
As long as the migrating economic agents have complete and accurate information concerning rural and urban wage rates and probabilities of obtaining employment, they will make an expected income-maximizing decision.