The aggregate productivity effects of internal migration: Evidence from Indonesia

• Main Authors: Bryan, G. (Author), Morten, M. (Author)
• Format: Article
• Language: English
• Published: University of Chicago Press 2019
• Subjects: heterogeneity; human capital; Indonesia; internal migration; labor migration; labor productivity; migration determinant; wage determination
• Online Access: View Fulltext in Publisher

 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. © 2019 by The University of Chicago. All rights reserved.