Optimal Population Size and Urban-Rural Composition of a Distant, Large, Arid Island: A Model and Some Numerical Simulations

Abstract

Low population density and large distance from civilization centers generate high costs of isolation. Immigra- tion reduces these costs for veteran residents but reduces social and cultural cohesion, increases the demand for scarce re- sources and affects the rate of urban unemployment. An expected net benefit maximization model for determining the op- timal population size and the equilibrium urban-rural composition of an island similar to Australia is constructed. The model is simulated for various agricultural water prices. The simulation results illustrate the central role of the effect of immigration on urban unemployment rate in the determination of the island's optimal population size. INTRODUCTION This paper deals with the optimal population size and rural-urban composition of a distant, large, arid island. The island's current population is small and has a low fertility rate. Distance and dispersion hinder communication and provision of commodities and services and the island's in- habitants bear mental and material costs of isolation. Immi- gration is the main way for increasing the island's population density, strengthening the island's international integration and, thereby, moderating the costs of isolation borne by the island's inhabitants. However, immigration reduces the is- land's levels of cultural and social cohesion. It also affects the island's rural and urban land and water use and natural