This paper provides new evidence on how a relatively open internal migration policy can influence migrant assimilation outcomes. We revisit the findings of previous studies on international labour migration in developing countries by investigating the economic consequences of moving people from rural areas to four Indonesian cities in which international migration is relatively free. The empirical investigation uses cross-sectional and individual-level panel data techniques. The results suggest that Indonesian migrants do not experience earnings penalties following their arrival in urban areas but have persistently higher earnings than their urban non-migrant counterparts. However, the higher earnings are accompanied by a worrying decline in migrant mental health. The finding of persistently higher earnings contrasts with the results of studies in countries such as China and Vietnam, which have more restrictive policies for rural–urban migration. We argue that economic assimilation can be highly successful in developing economies if the internal migration regime is relatively open, yet it creates an adverse mental health consequence.

Keywords: Indonesia, rural–urban migration, migration policy, mental health of internal migrants JEL: O15, R23, R28