Pandemic-induced de-urbanisation in Indonesia

Author name: 
Peter Warr
Arief Anshory Yusuf

The COVID-19 pandemic has affected Indonesia severely. It was initially an urban event, but the loss of urban jobs has induced a large urban to rural migration, which we call de-urbanisation. This phenomenon temporarily reversed the long-term process of rural to urban reallocation of labour. In early 2021 the approximate size of this de-urbanisation was known, but not its effects. This paper analyses the general equilibrium consequences of this overlooked feature of the pandemic. The analysis shows that taking de-urbanisation into account, the negative economic impact of the pandemic is largest among rural, not urban households, especially the poorest.

Key words: De-industrialisation; Indonesia; COVID-19; structural change; rural poverty; urban poverty; inequality. JEL codes: I15; O12; O53.

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