The Aggregate Productivity Effects of Internal Migration: Evidence from Indonesia

61 Pages Posted: 26 Jun 2017 Last revised: 28 Apr 2022

See all articles by Gharad Bryan

Gharad Bryan

London School of Economics & Political Science (LSE) - Department of Economics

Melanie Morten

Stanford University

Date Written: June 2017

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

Bryan, Gharad and Morten, Melanie, The Aggregate Productivity Effects of Internal Migration: Evidence from Indonesia (June 2017). NBER Working Paper No. w23540, Available at SSRN: https://ssrn.com/abstract=2992415

Gharad Bryan (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Melanie Morten

Stanford University ( email )

Stanford, CA 94305
United States

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