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Pandemic‐induced De‐urbanization in Indonesia: Urban and Rural Impacts

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  • Peter Warr
  • Arief Anshory Yusuf

Abstract

In Indonesia, the negative health impact of COVID‐19 and the initial, direct loss of employment have been largest in urban, not rural areas. But the second‐round effects on labor markets have been very different. They have included a huge, empirically documented migration of newly unemployed urban workers from urban to rural areas, in urgent search of employment, food, and safety from the pandemic. We call this “de‐urbanization.” It placed the migrating workers in economic competition with the least skilled agricultural workers, expanding their numbers by almost 8%. By increasing the supply of unskilled farm labor, de‐urbanization depressed farm workers' real wages. Because the demand for farm labor is inelastic, the total wage income of these workers, aggregated across all unskilled farm laborers, declined. The households relying on this source of income are by far Indonesia's poorest. Similar outcomes may occur in other pandemic‐affected developing countries with large agricultural sectors.

Suggested Citation

  • Peter Warr & Arief Anshory Yusuf, 2024. "Pandemic‐induced De‐urbanization in Indonesia: Urban and Rural Impacts," The Developing Economies, Institute of Developing Economies, vol. 62(2), pages 139-174, June.
    • Handle: RePEc:bla:deveco:v:62:y:2024:i:2:p:139-174
    DOI: 10.1111/deve.12392
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    References listed on IDEAS

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    1. Andy Sumner & Christopher Hoy & Eduardo Ortiz-Juarez, 2020. "Estimates of the impact of COVID-19 on global poverty," WIDER Working Paper Series wp-2020-43, World Institute for Development Economic Research (UNU-WIDER).
    2. Peter Warr & Arief Anshory Yusuf, 2014. "World food prices and poverty in Indonesia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(1), pages 1-21, January.
    3. David Laborde & Will Martin & Rob Vos, 2021. "Impacts of COVID‐19 on global poverty, food security, and diets: Insights from global model scenario analysis," Agricultural Economics, International Association of Agricultural Economists, vol. 52(3), pages 375-390, May.
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