Climate change and labor mobility: A longitudinal study of agricultural households in Indonesia

Climate change presents a significant challenge to the agricultural sector. It disrupts farming processes and reduces productivity, increasing uncertainty for farming households and driving them to seek alternative livelihoods. This research undertakes an examination of the impact of climate change, proxied by variation of rainfall and temperature, on labor mobility in Indonesia using longitudinal data from three successive rounds of the Indonesia Family Life Survey (IFLS). Labor mobility refers to sectoral shifts, where a household head changes employment sectors, regardless of relocation. We employ an instrumental variable approach to ensure robust estimation by accounting for potential endogeneity of climate variables, using altitude and latitude as instruments. Our findings indicate that variation of rainfall and temperature affects labor mobility in Indonesia’s agricultural households. Specifically, a one percent increase in the coefficient of variation for rainfall and temperature significantly increases the probability of labor mobility by approximately 0.47 and 1.38 percentage point, respectively. We further demonstrate that the effect operates primarily through changes in farm production costs that influence labor mobility, especially under varying rainfall. The heterogeneity analysis indicates that impact of rainfall and temperature variability are more pronounced among farmers in Java, particularly those with higher education and smaller landholdings. Finally, this study highlights the causal link between climate change and labor mobility, emphasizing that improving agricultural efficiency is crucial to mitigating its adverse impacts. Building a cost-efficient and climate-resilient agricultural system requires combining precision agriculture, human capital development, and institutional coordination to enhance resilience and reduce labor mobility in agriculture.