Internal Migration and Labor Market Outcomes in Indonesia

We study the labor market effects of domestic migration in Indonesia. To address the endogeneity of migrants' settlement decisions, we use an internal migration version of the Bartik shift-share instrument based on information about historical migration patterns from the Indonesian censuses. The multi-instrument approach we use allows us to account for persistent effects of past migration that could otherwise violate the exclusion restriction. We find that internal migration is associated with an increase in migrant employment and a decrease in native employment. Less educated natives in low-education regencies are most affected. Policies looking to minimize the adverse effects of internal migration should aim at improving the human capital of the natives.