Liquidity Constraints and Migration: Evidence from Indonesia

Although liquidity constraints have been seen as both a factor limiting individuals from migrating and a motivation for households to send a migrant, the consequences of relaxing liquidity constraints on migration behavior have not been adequately explored due to data limitations. In this study, we take advantage of an unusual policy, Bantuan Langsung Tunai — a national-level unconditional cash transfer program targeted toward the poorest households in Indonesia — to empirically assess the impact of increased liquidity on the migration behavior of poor Indonesian households. With a highly mobile population and a long history of circular migration, Indonesia is an ideal space to study migration. Using panel data from the Indonesian Family Life Survey, the results demonstrate that a positive liquidity shock increases the probability of migration among low-asset households, among households with a migration history, and, most significantly, among low-asset households with a migration history