JICA Research Institute

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Working Papers

No.11 Human Capital, Mobility, and Income Dynamics: Evidence from Indonesia

This paper examines the effects of household formation on income dynamics using panel data from Indonesia. The focus of our analysis is to explore the determinants of household income dynamics in 1995-2007 when we change the definition of household. Empirical results show that intergenerational gap in education (i.e., education growth) as well as the number of young and prime-age members in the household play important roles in determining income dynamics, especially when we include out-migrants. This is consistent with individual migration behavior: the young and educated tend to move out of their villages over the 12 years. We also found that out-migration increases net-remittances to the household. The results indicate the importance of human capital as well as endogenous migration (attrition) in rural household income dynamics.

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