Migration After the 1997 Indonesian Crisis: Did Economic Losers Move?

Abla Safir 1, Kathleen Beegle2
1OECD, France, 2World Bank, USA

The Indonesian 1998 financial crisis sparked a lot of speculation on migration. In this paper,
we use regional variation in inflation, interacted with income sensitivity to inflation to estimate a causal impact of a change in consumption induced by the crisis on migration. The specific group we examine is that of government workers. We take a difference-in-difference approach comparing government workers across inflation areas to non-government income earners across inflation areas. In inflationist areas, government workers experienced a relative dramatic drop in consumption. In addition, we conduct descriptive analysis on the migration of construction workers, a group that was expected to be both hurt by the crisis and migrate. While we find an increase in migration throughout the period, and in fact as early as 1997, we do not find a relatively higher migration rate among government workers in high inflation areas. Neither do we find that construction workers were relatively more likely to migrate or more likely to move to rural areas, when compared to other income earners. Households particularly hurt during the crisis did not out-migrate more than households less hurt, hinting towards a limited use of migration as a coping mechanism.

View full paper