Essays on the labour market and migration in Indonesia

Abstract

This thesis studies several important aspects of the Indonesian labour market, namely internal migration, child labour and self-employment. Using the Indonesian Family Life Survey (IFLS) panel data, the thesis examines the determinants of internal migration, the impact of migration on children’s employment and schooling, and the potential indirect impact of government’s financial assistantship in promoting self-employment and entrepreneurship.

The first part of this thesis aims to analyse the relationship between household assets and migration decision. Unlike the previous literature that has tended to focus on the role of income as a major determinant of migration, this part shows the importance of household assets in determining the migration decision. This part shows empirically that household assets have significant effect on migration decision and compares it to the impact of household income on migration decision. Controlling for the potential endogeneity problem between assets and migration using instrumental variable techniques, we find a negative relationship between household assets and the migration decision contrary to the effect of household income on the migration decision. This highlights the importance of controlling for assets as opposed to income in the context of internal migration.

The second part contributes to the literature on the relationship between migration, schooling, and child employment by examining the hazard rate and the duration to falling into employment in migrant households. This part exploits the duration of schooling and the duration before children’s first employment. Using time-to-event approach, this part shows empirically that migration has significant effect on the duration of schooling (and dropping-out of schooling) and on the time of children’s first employment. This part sets-up two initial independent environments to analyse the impact of migration to child schooling and the impact of migration to child labour separately. The first set-up finds that children in migrant households stay longer in education than children in migrant households. In the other setting, children in migrant households are sent to work faster than their counterparts. Additionally, in another set-up where conditional in child working, children in the migrant household stay longer in school.

While the third part of this thesis utilises the Bantuan Langsung Tunai (BLT) program as a natural experiment to examine the effect of a windfall on self-employment. BLT was an unconditional cash transfer program to assist poor households during the reductions in domestic fuel subsidy in 2005. The part examines where BLT receipts promote self-employment and entrepreneurship as a result of the additional income. This thesis uses instrumental variable techniques to address the potential endogeneity problems in analysing the effect of BLT on self-employment and entrepreneurship. We find that individuals in BLT-receiving households have higher probability to start self-employment and entrepreneurial activities or stay-in in their business. This highlights an important indirect effect of such cash transfers in poor households.

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Identifiers

ORCID for Jackline Wahba: orcid.org/0000-0002-0002-3443

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