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Internal Migration and Labor Market Outcomes in Indonesia

Author

Listed:
  • Tushar Bharati

    (Business School, The University of Western Australia)

  • Wina Yoman

    (Bain & Company)

Abstract

We study the labor market effects of domestic migration in Indonesia on the employment outcomes of the natives and the migrants. To address the endogeneity of migrants’ settlement decisions, we use the information on the historical migration patterns from the Indonesian censuses to construct an internal migration version of the Bartik shift-share instrument. The instrument, used widely in the study of international migration, is based on the observation that even within countries, migrants tend to move to regions with a large migrant population from their region of origin. However, if the migration patterns are unchanged over time, past migration may affect current labor market outcomes directly, violating the exclusion restriction. To overcome this, we use a multi-instrument approach that lets us account for the long-term effects of migration separately. We find that internal migration is associated with an increase in migrant employment and a decrease in native employment. Less-educated natives in loweducation regencies are most-affected. The findings suggest that policies aiming to minimize the adverse effects of internal migration should aim at improving the human capital of natives.

Suggested Citation

  • Tushar Bharati & Wina Yoman, 2021. "Internal Migration and Labor Market Outcomes in Indonesia," Economics Discussion / Working Papers 21-05, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:21-05
    Note: MD5 = fc93cb922c5ba47c9397e42b3c45d86f
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    More about this item

    Keywords

    shift-share instrument; internal migration; employment; natives;
    All these keywords.

    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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