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The Aggregate Productivity Effects of Internal Migration: Evidence from Indonesia

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  • Gharad Bryan
  • Melanie Morten

Abstract

We estimate the aggregate productivity gains from reducing barriers to internal labor migration in Indonesia, accounting for worker selection and spatial differences in human capital. We distinguish between movement costs, which mean workers will only move if they expect higher wages, and amenity differences, which mean some locations must pay more to attract workers. We find modest but important aggregate impacts. We estimate a 22% increase in labor productivity from removing all barriers. Reducing migration costs to the US level, a high mobility benchmark, leads to an 8% productivity boost. These figures hides substantial heterogeneity. The origin population that benefits most sees an 104% increase in average earnings from a complete barrier removal, or a 37% increase from moving to the US benchmark.

Suggested Citation

  • Gharad Bryan & Melanie Morten, 2017. "The Aggregate Productivity Effects of Internal Migration: Evidence from Indonesia," NBER Working Papers 23540, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23540
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    References listed on IDEAS

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    1. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    2. Caselli, Francesco, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 5266, London School of Economics and Political Science, LSE Library.
    3. Samuel Bazzi & Arya Gaduh & Alexander D. Rothenberg & Maisy Wong, 2016. "Skill Transferability, Migration, and Development: Evidence from Population Resettlement in Indonesia," American Economic Review, American Economic Association, vol. 106(9), pages 2658-2698, September.
    4. Melanie Morten, 2016. "Temporary Migration and Endogenous Risk Sharing in Village India," NBER Working Papers 22159, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Benoît Schmutz & Modibo Sidibé, 2019. "Frictional Labour Mobility," Review of Economic Studies, Oxford University Press, vol. 86(4), pages 1779-1826.
    2. Agha Ali Akram & Shyamal Chowdhury & Ahmed Mushfiq Mobarak, 2017. "Effects of Emigration on Rural Labor Markets," NBER Working Papers 23929, National Bureau of Economic Research, Inc.
    3. Xu, Shang & Klaiber, Allen & Miteva, Daniela, 2018. "The Impact of Concessions on Household Location Choice and Well-Being in Indonesia," 2018 Annual Meeting, August 5-7, Washington, D.C. 274009, Agricultural and Applied Economics Association.
    4. Sebastian Heise & Tommaso Porzio, 2019. "Spatial Wage Gaps and Frictional Labor Markets," Staff Reports 898, Federal Reserve Bank of New York.
    5. Porzio, T. & Santangelo, G., 2019. "Does Schooling Cause Structural Transformation?," Cambridge Working Papers in Economics 1925, Faculty of Economics, University of Cambridge.
    6. Sebastian Heise & Tommaso Porzio, 2018. "The Invisible Border between East and West Germany," 2018 Meeting Papers 605, Society for Economic Dynamics.
    7. Imbert, Clément & Papp, John, 2020. "Costs and benefits of rural-urban migration: Evidence from India," Journal of Development Economics, Elsevier, vol. 146(C).
    8. Baysan, Ceren & Dar, Manzoor H. & Emerick, Kyle & Sadoulet, Elisabeth, 2019. "The agricultural wage gap within rural villages," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt8kq8z35d, Department of Agricultural & Resource Economics, UC Berkeley.
    9. Fabian Eckert & Michael Peters, 2018. "Spatial Structural Change," 2018 Meeting Papers 98, Society for Economic Dynamics.
    10. de Brauw, Alan, 2018. "Rural-urban migration and implications for rural production," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 6(3), March.
    11. Porzio, Tommaso & Santangelo, Gabriella, 2017. "Structural Change and the Supply of Agricultural Workers," CEPR Discussion Papers 12495, C.E.P.R. Discussion Papers.
    12. Zi, Yuan, 2020. "Trade Liberalization and the Great Labor Reallocation," CEPR Discussion Papers 14490, C.E.P.R. Discussion Papers.

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    More about this item

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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