What is Behind Labor Mobility Costs? Evidence from Indonesia
The ability of workers to transition to a new job is crucial to determine the resilience of an economy to (positive or negative) shocks. This paper provides new evidence on the factors that affect labor mobility by using labor data on Indonesia, on...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/266171569514810972/What-is-Behind-Labor-Mobility-Costs-Evidence-from-Indonesia http://hdl.handle.net/10986/32458 |
| Summary: | The ability of workers to transition to
a new job is crucial to determine the resilience of an
economy to (positive or negative) shocks. This paper
provides new evidence on the factors that affect labor
mobility by using labor data on Indonesia, one of countries
with the higher estimated labor mobility costs. To do so it
investigates correlates of the probability of an individual
finding a job after a negative labor market shock, as well
as of the duration of job search. The results show that
higher housing prices are associated with higher mobility
costs, suggesting that housing benefits or policies that
increase the supply of housing may help reduce mobility
costs in Indonesia. More generally, public expenditure on
infrastructure seems to reduce labor mobility costs,
particularly in urban areas, consistently with a reduction
in transaction costs – such as urban transport. The results
also highlight that formal institutional mechanisms such as
job advertisements do not appear to work effectively to help
labor mobility in Indonesia, suggesting the need to re-think
active labor market policies. On the other hand, minimum
wage level – a key outcome of labor market policy - does not
appear to affect labor mobility. Labor mobility costs seem
higher in urban areas, which could indicate a lower
opportunity cost of joblessness than in rural area,
employment composition skewed towards sectors with higher
mobility costs and/or large congestion costs that negatively
affect labor mobility. On the other hand, the general female
penalty in labor mobility is less accentuated in urban
areas, which may be the result of sectoral composition
and/or less discriminatory cultural norms than in rural areas. |
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