Gharad Bryan and Melanie Morten
Journal of Political Economy, 2019, vol. 127, no. 5, pp 2229-2268
Bryan et al. estimate the aggregate productivity gains from reducing barriers to internal labor migration in Indonesia, accounting for worker selection and spatial differences in human capital. They 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. They ﬁnd modest but important aggregate impacts. They 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 ﬁg-ures hide substantial heterogeneity. The origin population that beneﬁts most sees a 104 percent increase in average earnings from a complete bar-rier removal, or a 25 percent gain from moving to the US benchmark.