The aggregate productivity effects of internal migration: evidence from Indonesia

Gharad Bryan and Melanie Morten

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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 move only 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 percent increase in labor productivity from removing all barriers. Reducing migration costs to the US level, a high-mobility benchmark, leads to a 7.1 percent productivity boost. These figures hide substantial heterogeneity. The origin population that benefits most sees a 104 percent increase in average earnings from a complete barrier removal, or a 25 percent gain from moving to the US benchmark.

Keywords: Selection; Internal migration; Indonesia (search for similar items in EconPapers)
JEL-codes: J1 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2019-10-01
New Economics Papers: this item is included in nep-eff, nep-mig, nep-sea and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (114)

Published in Journal of Political Economy, 1, October, 2019, 127(5), pp. 2229 - 2268. ISSN: 0022-3808

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:88177

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