Development and Migration Interactions using Natural Experiments

The decision of whether or not to migrate (or whether or not to return) has wide-ranging consequences on the lives of individuals and their families. However, research - especially empirical - that explores the extent to which one's economic conditions affect their migration decisions have been slow to emerge in the literature. Collectively, these three papers contribute to fill this gap in the literature by using three distinct natural experiments and unique datasets. Nonetheless, each paper makes its own individual contributions.In the first paper, I explore the role of local development on outmigration decision. To address the inherent endogeneity issue, I take advantage of the exogenous phasing of the district level elections in Indonesia to tease out an unbiased and causal impact. Two different datasets, the Indonesian Family Life Survey and the Indonesian Census, are used to do the analyses. They provide consistent results - a household in a district that went through direct election is 15 percent less likely to be a migrant-sending household. This is true particularly for districts that are in Java and Bali - a household in a district in Java and Bali that went through a direct election is 22 percent less likely to be a migrant-sending household. The results suggest that local autonomy and development reduce the likelihood of migrants leaving the point of origin.In the second paper, I explore the role of liquidity constraints on migration decisions. Even in the presence of positive net benefits, some potential migrants may not be able to migrate due to liquidity constraints because migration is a costly process. Typically, the most liquidity-constrained are the poorest households. Does this mean that these households will invest in migration in an event of positive income shock? Is the impact higher among households with prior migration history than those without? With a highly mobile population and a long history of circular migration, Indonesia is also an ideal case to study the role of migration history in influencing future migration. In this paper, I take advantage of an unusual natural experiment, Bantuan Langsung Tunai (BLT) - a national level unconditional cash transfer program targeted towards the poorest households in Indonesia - to explore the role of liquidity on migration decisions. I use Indonesian Family Life Survey, a panel dataset, to perform the empirical analyses. The results demonstrate that a positive income shock increases the probability of migration among low asset households, among households with migration history and more significantly among low-asset households with migration history.Although the first two essays study the same context and the same time period, it should be noted that each essay explores a different issue using a distinct natural experiment that control for other factors. While decentralization is a broad development strategy that affects the entire population, cash transfer is targeted to a certain group of people - in this case, the poorest households. The results from the two essays suggest that broader policies rather than targeted cash flows are more likely to stem migration flows.Lastly, in the third paper, I study the role of macroeconomic shocks in migrants' return and households' investment decisions. The potential endogeneity issue that may arise while exploring such questions is addressed by exploiting the variability in the Gross Domestic Product growth rate shock generated by the global financial crisis of 2008/09 in the multitude of destinations that Nepali migrants go to. The results show that Nepali migrants are more likely to return, on average, in an event of positive growth rate shock. Additionally, migrants earning the highest in the foreign earnings distribution are most likely to return. Households' investment decisions vary across foreign earnings with no significant impact for households with a migrant earning low foreign wages. Households with intermediate foreign wage earners are most likely to invest in bikes and land while those with high foreign wage earners are most likely to invest in bikes and mobile phones.