Essays on rural-to-urban migration, labour market and economic development in Indonesia

Abstract

This thesis explores three topics on migration, labor market and development economics. Chapter 2 provide analysis on the impacts of rural-urban migration on expenditure patterns. Using two waves of data from the Indonesian Family Life Survey (IFLS) 2000 and 2007, this study applies household demand analysis to examine rural households' expenditure patterns. A system of expenditure equations is estimated jointly using seemingly unrelated regression (SUR) estimation. Three key findings emerge. First, migration has a statistically significant effect on reshaping Indonesian rural households' expenditure on food and non-food goods, and particularly on utility and transportation, durable goods, and education. Second, households with migrants spend more at the margin on meat and vegetables compared with households without migrants. Third, households with migrants spend more at the margin on housing as compared with households without migrants. Chapter 3 attempts to investigate the effect on Indonesia men's health of having left school during the economic crisis 1997-2000. Two empirical patterns motivate this research. First, leaving school during an economic crisis appears to have persistent and negative career effects on workers. Second, labour market trends and health outcomes are correlated. A quasi-experiment using provincial unemployment rate at time of leaving school and the economic crisis period conducted to identify persistent health effects. Five health-risk criteria are examined: mental health, lung capacity, body mass index (BMI), blood pressure and smoking. Using data from the IFLS 2000 and 2007, this study applies a standard health production function to model health as a function of leaving school during economic crisis. Three key findings emerge. First, labour market conditions and school-leavers' health are negatively correlated. Second, men who left school during the 1997-2000 economic crisis have had worse mental health outcomes than men who left school before the economic crisis. Third, men who left school during the economic crisis display higher-risk health-related behaviour than their pre-crisis school leaving counterparts. Additional analysis suggests that the health effects may partially operate through labour market outcomes. The results suggest that men who leave school during economic downturn may have experience persistent poor labour market experiences with poor health as a result. Finally, Chapter 4 attempt to answer the question on what types of households are vulnerable to consumption changes when they are hit by natural disasters? This question is investigated using two-period data obtained in rural Indonesia, in 2000 and 2007 in relation to floods and earthquakes. Empirical results show that the sensitivity of consumption changes to idiosyncratic or aggregate shocks differs across households, depending on the characteristics of the households. The estimation shows significant negative effects of these disasters on households' consumption. The results also found that several factors play a significant role in explaining rural households' response to disaster shocks in terms of consumption changes. These factors include the number of household members, the household head's education level, the number of dependent household members, participation in non-farm business and land size owned or cultivated.