THE EFFECT OF INTERNAL MIGRATION ON LOCAL LABOUR MARKET OUTCOMES: EVIDENCE FROM INDONESIA

Abstract

Using data from Indonesia, I study the impact of internal migration on the labour market outcomes of the non-movers, through the use of the past settlement instrument. I estimate that a 1 percentage point increase in the net migration rate of a regency reduces annual wage of residents in the regency by 4.66%. These effects are heterogeneous across different demographic segments of the non-movers. In particular, I find evidence that the non-movers who are middle educated and aged between 26 to 36 are the most adversely affected by internal migration. This segment of the non-movers also most closely resembles the average profile of the migrants, suggesting that the migrants are competing most intensely with this group of non-movers in the labour market. However, I do not find any appreciable evidence that internal migration has an impact on the hours and weeks worked of non-movers.