How Intergroup Contact Can Foster Nation Building

Unity in Diversity? How Intergroup Contact Can Foster Nation Building Abstract Throughout history, many governments have introduced policies to unite diverse groups through a shared sense of national identity. However, intergroup relationships at the local level are often slow to develop and confounded by spatial sorting and segregation. We shed new light on the long-run process of nation building using one of history’s largest resettlement programs. Between 1979 and 1988, the Transmigration program in Indonesia relocated two million voluntary migrants from the Inner Islands of Java and Bali to the Outer Islands, in an effort to integrate geographically segregated ethnic groups. Migrants could not choose their destinations, and the unprecedented scale of the program created hundreds of new communities with varying degrees of diversity. We exploit this policy-induced variation to identify how diversity shapes incentives to integrate more than a decade after resettlement. Using rich data on language use at home, marriage, and identity choices, we find stronger integration in diverse communities. To understand why changes in diversity did not lead to social anomie or conflict, we identify mechanisms that influence intergroup relationships, including residential segregation, cultural distance, and perceived economic and political competition from migrants. Overall, our findings contribute lessons for the design of resettlement policies and provide a unique lens into the intergenerational process of integration and nation building. 1 1 Introduction Uniting people from diverse cultures is a founding principle of many nation states.1 Throughout history, leaders have introduced policies to foster a national identity that would sustain an “imagined political community” in which citizens remain connected by shared history and values, despite never meeting one another (Anderson, 1983). However, with rising geographic mobility, there are concerns that growing local diversity may encourage a narrower sense of “we” and undermine this nation-building objective (Putnam, 2007).2 The recent refugee crisis has also stoked debate over how to design resettlement policies to facilitate the integration of diverse groups (Bansak et al., 2018). The key contribution of this paper is to show how local diversity influences integration and contributes to an intergenerational process of nation building. Social theorists offer competing views. Some argue that exposure to new cultures provokes backlash and may incite conflict (Blumer, 1958; Huntington, 2004). Others posit that negative sentiments may dissipate as intergroup relationships develop over time with greater contact (Allport, 1954). Alternatively, diversity may engender social anomie or isolation, which limits intergroup relationships (Alesina and La Ferrara, 2000; Algan et al., 2016). Empirically, however, it is difficult to identify whether contact strengthens intergroup relationships in the long run because (i) identities and social relationships change slowly and tend to be confounded with time trends, (ii) diverse communities are often unstable due to tipping forces (Schelling, 1971), and (iii) persistent diversity is often confounded by favorable geography and endogenous sorting (Michalopoulos, 2012). We use a large-scale policy experiment in Indonesia to address these identification challenges. Indonesia’s Transmigration program, one of the largest resettlement efforts in history, provides an ideal setting to understand how intergroup contact can foster nation building. After independence, the government faced urgent pressures to forge an Indonesian identity that would unite diverse groups across the archipelago and overcome secessionist tendencies. The government viewed resettlement as part of a broader effort to integrate more than 700 ethnolinguistic groups that lived historically in segregated communities. Between 1979 and 1988, the Transmigration program assigned two million voluntary migrants (hereafter, transmigrants) from the Inner Islands of Java and Bali to new settlements across the Outer Islands. Each settlement was endowed with the same public institutions and included a mix of Inner and Outer Islanders with the goal of bridging one of the country’s most salient divisions. We exploit the haphazard assignment of transmigrants across settlements to isolate plausibly exogenous, long-run variation in local diversity. Institutional and capacity constraints limited planners’ abilities to systematically assign transmigrants. Moreover, a lottery was used to distribute farm plots and assign housing to newly-arriving migrants. Imperfect land markets tied migrants to these initial 1 For example, “United in Diversity” is the motto for the European Union, E pluribus unum (out of many, one) for the United States, and “Unity in Diversity” for South Africa and Indonesia. There are numerous historical examples of efforts “to form French citizens” (Weber, 1976), “to make Italians” (Duggan, 2007), and to create “one kind of man, Indonesian” (Hoey, 2003). 2 Alesina et al. (2017) and Miller (2012) discuss challenges of forging a shared identity within the European Union. More generally, migration pressures are growing among minorities within rich countries (see Frey, 2014, on the United States) and in newer migration corridors from poor to rich countries (Hanson and McIntosh, 2016). The U.S. is projected to become a majority minority nation by 2044 (Colby and Ortman, 2014) and the United Kingdom by 2066 (Coleman, 2010). 1 farm plots, limiting ex-post sorting. Ultimately, the large scale of the program created nearly 900 communities along a continuum of policy-induced diversity. Using the 2000 Population Census, we show that even after two decades, these communities exhibit significantly greater ethnic diversity—driven largely by the Inner–Outer divide—and less within-village ethnic segregation than other villages in the Outer Islands.3 The persistence of this local diversity suggests limited sorting or tipping that would have otherwise neutralized the initial policy assignment. To address the concern that some of today’s ethnic diversity is explained by sorting, we develop an instrumental variables strategy that leverages this initial assignment. In particular, we instrument for the Inner-Island ethnic share in a village in 2000 using the initial stock of transmigrants assigned in the 1980s. Planners determined potential population sizes in settlements by assessing the carrying capacity of available land using soil attributes and topography. Conditional on these predetermined natural advantages (and hence, on potential population), the larger the initial transmigrant stock, the greater the Inner-Island ethnic share today. We show that this strategy helps rule out endogenous exante assignment and ex-post sorting of migrants to places with tolerant natives. Our key measure of integration is the choice of language used at home, as reported in a 2006 household survey. Language is broadly seen across the globe as the most critical component of national identity (Pew Research Center, 2017). Indeed, policymakers view the national language, Bahasa Indonesia or Indonesian, as synonymous with Indonesian identity, widely promoting its use across economic and social domains.4 Indonesian is rooted in the language of an ethnic minority (Malay), with as few as 5 percent speaking Malay when it was chosen as the national language in 1928. Although almost all Indonesians can speak it, less than 20 percent choose Indonesian as their primary language at home. Choosing to primarily speak Indonesian at home, regardless of one’s initial motive, deepens the adoption of the national identity in this generation and the next, and ultimately advances nation-building. We further complement language use at home with two other proxies for nation building: (i) a child’s identification of Indonesian as her mother tongue from a 1995 auxiliary survey, and (ii) post-program interethnic marriage rates from the 2000 Population Census. Government officials viewed language and intermarriage as barometers for integration, and both measures are used as such throughout the literature on cultural change (e.g., Abramitzky et al., 2015; Giuliano and Nunn, 2017). To explain how intergroup contact influences the intergenerational process of nation building, we propose a simple conceptual framework. Individual preferences have two components: a baseline idiosyncratic utility and a national stock of identity “capital” shared by all citizens. The national component is persistent, in that it depends on past experience, akin to models of cultural persistence, brand preferences, and habit formation. For a diverse country like Indonesia, nation-building policies such as national language promotion, compulsory schooling, or residential desegregation can reinforce a national “brand” that promotes integration and facilitates intergroup relationships. For example, in diverse 3 There are fourteen ethnic groups native to the Inner Islands, including the Javanese who represent 40 percent of the country’s population. The Outer Islands have many distinct ethnic groups, and around 20 have more than 1 million members according to Population Census data from 2000. 4 As Kramsch (1998) argues, “There is a natural connection between language and identity insofar as language often defines membership to a specific group to the exclusion of nonmembers. Through language the group manifests ‘personal strength and pride’ and a ‘sense of social importance and historical continuity’ and most of all belonging to an ‘imagined community’ that shares a common worldview and that commands allegiance to it. . . ”. Simpson (2007a) notes, for example, that “Indonesian has also become positively valued as the primary shared component of the country’s emerging national identity.” 2 communities, parents may choose to speak the national language at home to help their children develop economic or social relationships across groups. Over time, the more they speak Indonesian at home, the more the children build up the stock of Indonesian identity “capital.” Using auxiliary longitudinal survey data, we provide descriptive evidence that parents’ language and marriage decisions have intergenerational implications for national identity and integration. In theory, individual incentives to develop intergroup relationships can vary with relative group sizes. As such, the relationship between ethnic shares and national language use at home is nonlinear and ambiguous. To illustrate, consider a native Outer Islander in a village with an (exogenouslydetermined) Inner-Island share of either 10 or 90 percent. In the former, since Outer Islanders are dominant, she prefers to segregate and speak her native Outer-Island language. In the latter, where Inner Islanders are dominant, she may prefer to assimilate and speak the Inner-Island language at home. With a clear majority, she prefers a local ethnic language and is unlikely to integrate and speak Indonesian. However, in diverse villages with a more equal split of Inner and Outer Islanders, it is unclear whether segregation, assimilation, or integration will prevail in equilibrium. On the one hand, each group may have enough co-ethnic members to sustain segregated communities. On the other hand, tipping the Inner-Island share above 50 percent gives rise to network externalities from assimilating with the majority group (Lazear, 1999). Meanwhile, there are potential benefits of coordinating on a common national language. In particular, national integration could generate greater social surplus (above and beyond local assimilation) through spillovers to the broader community beyond the village. Therefore, the relationship between Indonesian use at home and the Inner-Island ethnic share could have an inverted-U, flat, or U shape. Given the weak incentives to integrate at the two extremes (10 and 90 percent), the shape depends on which forces dominate in the middle. Diverse villages that foster intergroup contact can promote integration. Yet, it is precisely in such communities with two large groups where polarization dynamics are most likely to exacerbate divisions (Esteban and Ray, 1994). Facilitating conditions that encourage cooperative rather than conflictual equilibria in these settings is a major policy challenge. We find a significant inverted-U shape for Indonesian use at home, suggesting that national integration is strongest in communities where Inner and Outer Islanders are in roughly equal proportion. This is consistent with the notion that, over time, intergroup contact can promote convergence towards a common national identity. The turning point around 45 percent Inner-Island ethnic share is relatively high, given that with roughly equal mixes, individuals can segregate with fellow co-ethnics. We find similar effects of diversity on national language use at home using other measures such as overall ethnolinguistic fractionalization (ELF) or ELF among Inner-Island groups. A battery of robustness checks support our interpretation of this result as cultural integration fostering nation building. For example, we use additional survey data from 1995 to show that the inverted-U shape is not explained by immigrants arriving after the initial year of settlement. Nor is it explained by intermarried parents or those reporting Indonesian as their mother tongue (and perhaps more predisposed to speak Indonesian). Moreover, we find similar inverted-U relationships for high and low education households, which suggests that ability differences are unlikely to confound the choice to use Indonesian at home. Finally, relaxing the IV exclusion restriction, the inverted-U relationship appears in the reduced form as well. 3 We find similar inverted-U relationships for other measures of integration. First, we identify a strong inverted-U relationship between the Inner-Island ethnic share and the claim to Indonesian mother tongue among children. This holds even for children whose mother does not speak Indonesian at home, capturing a deeper sense in which identity is changing among the next generation. Second, we find an inverted-U relationship for interethnic marriage, consistent with stronger intergroup relationships in mixed villages despite co-ethnic marriage markets being sufficiently large to maintain segregation. We identify several policy-relevant mechanisms that explain why intergroup contact fostered nation building rather than conflict. These tests rely on the wide geographic scope of the program that scattered settlements across a variety of different contexts. First, how settlements are configured spatially can affect integration by determining the likelihood of local intergroup contact. We find that as ethnic groups within villages become less segregated, national language use at home increases. The placement of villages themselves is also important, as diversity has more positive effects in more remote communities. Second, we find that diversity’s benefits can be shaped by the economic environment in important ways. To quantify the economic environment, we use a proxy for the degree of substitutability between Inner and Outer Islanders’ skills. This measure of the similarity in agroclimatic characteristics between the migrants’ origins in Java/Bali and their destination villages is an important determinant of agricultural productivity (Bazzi et al., 2016). Interestingly, we find an inverted-U shape in places with low agroclimatic similarity but a U shape in places with high similarity. This reversal suggests that diversity may discourage integration in the presence of competition between groups with similar skills. Third, sociopolitical factors at the local and regional levels can determine how diversity affects integration. We find greater home use of Indonesian where the majority group (Inner or Outer) is itself more ethnically fragmented in the village and in diverse places where the linguistic distance between Inner and Outer Islanders is greater (hence, raising the cost to assimilate). Both conditions increase the returns to coordinating on the national language relative to assimilating with the local majority (Lazear, 1999). Finally, we find stronger integration in places where transmigrants pose less of a regional political threat. Resettlement of politically dominant groups (e.g., the Javanese) in peripheral regions of the country is often viewed as threatening the political power of local ethnic minorities (see, e.g., Fearon and Laitin, 2011). We capture the extent of political competition by measuring whether the local native group is a dominant majority within the broader political unit. Our results suggest that the regional ethnopolitical balance is another crucial input in designing effective resettlement policies. The final part of the paper assesses whether the Transmigration program was a successful vehicle for nation building at the local level. Our identification strategy here relies on counterfactual villages that were planned but abruptly halted due to budget cutbacks following a sharp drop in global oil prices in the early 1980s. We further refine the comparison using a reweighting approach common in place-based evaluations (Kline and Moretti, 2014). We find that individuals in Transmigration villages are around three times more likely to report Indonesian as the primary language at home. Moreover, intermarriage rates among young cohorts are three times higher than in control areas, and not all of this increase can be explained by greater diversity in the marriage market. Our findings contribute to a nascent literature in political economy on nation building (Alesina and Reich, 2015). Many economic studies document adverse consequences of diversity (see Alesina and LaFerrara, 2005; Ray and Esteban, 2017, for a review), and a rich literature in political science shows that 4 members of the same ethnic group exhibit differing degrees of national affinity across, for example, the Niger–Nigeria border (Miles and Rochefort, 1991) and the Kenya–Tanzania border (Miguel, 2004). Yet, there is relatively little evidence on how diverse countries might effectively manage ethnic divisions.5 We leverage policy-induced variation to identify how local diversity affects intergroup relationships, helping to understand how different social conditions may facilitate integration over segregation. This relationship and its underlying mechanisms are important inputs to policy debates over how to balance these competing effects. Moreover, we clarify the key role of a national language in facilitating convergence towards a new shared identity, echoing other work on language and nation building (ClotsFigueras and Masella, 2013; Fouka, 2016; Laitin and Ramachandran, 2015). Our findings provide novel insight into the intergenerational process of cultural change in diverse societies (Bisin and Verdier, 2011; Fernandez, 2011; Giuliano and Nunn, 2017). Putnam (2007) and Algan et al. (2016) argue that diverse places tend to be isolating. We show how the incentives to connect with other groups change nonlinearly with relative group sizes.6 Our findings are consistent with recent studies on the role of intergroup contact in mitigating the adverse effects of segregation (Alesina and Zhuravskaya, 2011; Clingingsmith et al., 2009; Desmet et al., 2016). As resettlement programs and integration policies expand into new settings, our findings offer insight on the potential conditions in which ethnic diversity can be harnessed for improved social outcomes.7 Our evidence for long-run integration in diverse Transmigration villages remains striking given popular concerns that such large-scale resettlement was a classic case of cultural imperialism that would stoke ethnic conflict. Nevertheless, our findings resonate with theories of contact and cultural change and are consistent with a recent reappraisal of the program (Barter and Côté, 2015). The rest of the paper proceeds in seven sections. Section 2 provides background on nation building efforts in Indonesia. Section 3 provides relevant details on the Transmigration program. Section 4 describes our main data sources on diversity and nation-building outcomes. Section 5 presents our core empirical results linking local diversity to identity formation and the intergenerational process of nation building. Here, we develop the main identification strategy and also discuss salient mechanisms underlying the main results. Section 6 presents estimates of the place-based impact of resettlement on language use and intermarriage in the Outer Islands. Finally, Section 7 concludes. 2 Nation Building in Indonesia With a population of more than 250 million, Indonesia is the world’s fourth most populous country. It is also among the world’s most diverse, with more than 1,200 self-identified ethnic groups living on roughly 6,000 islands. The Javanese are the largest ethnic group, constituting 40 percent of the population, followed by the Sundanese with 15.5 percent (Ananta et al., 2013). Both groups originate from the 5 A few recent studies examine the role of public policies and leaders in influencing national unity in Rwanda (Blouin and Mukand, 2016) and Nigeria (Okunogbe, 2015). Other work examines the role of schools in fostering nation building through civic education (Bandiera et al., 2015; Lleras-Muney and Shertzer, 2015). 6 Recent work examines cultural assimilation through language and marriage during the period of mass immigration in the United States (Abramitzky et al., 2016; Advani and Reich, 2015). In contrast, we highlight conditions under which groups are more likely to integrate towards a new shared identity, not unlike the forging of American culture by migrants on the historical frontier (Bazzi et al., 2017). 7 Resettlement programs are already found in many countries, and they are growing in importance globally as climate change, infrastructure development, and conflict continue to displace millions (see Bazzi et al., 2016, for a discussion). 5 Inner Island of Java. Nationally, Indonesia’s index of ethnolinguistic fractionalization (ELF)—the probability that any two residents belong to different ethnicities—is around 0.7, according to 2000 Population Census data. Despite such diversity, most Indonesians live in ethnically segregated communities. Of the more than 60,000 urban and rural villages in Indonesia, the median village has an ELF of 0.05.8 For most of its history, the peoples of the Indonesian archipelago were governed by a collection of independent kingdoms (kerajaan), many of which were isolated from one another, separated by immense waterways and dense vegetation. The absence of a common ruler, together with geographic isolation, enabled the persistence of many different cultures, religious practices, and languages throughout the region. The divide-and-rule strategy of the Dutch East India Company (VOC) pitted different kingdoms against each other and sharpened the distinctions among them. As such, by the end of the nineteenth century, the peoples of Indonesia had little shared history, apart from their experiences with Dutch colonialism.9 For at least a decade after independence in 1945, political and military tensions threatened to derail nation-building efforts. Tensions often grew out of opposition to the increasing concentration of power in the capital, Jakarta, which many, particularly in the Outer Islands, associated with a growing dominance of the Javanese (Bertrand, 2004). These frustrations often coincided with rising ethnic tensions, and anti-Javanese sentiments and secessionist threats from the Outer Islands would surface from time to time (see, e.g., Mulder, 1996; Thornton, 1972). This historical context presented Indonesia’s political leaders with the problem of nation building. Anderson (1983, pp. 6–7) defines a nation as “an imagined political community . . . [where] members of even the smallest nation will never know most of their fellow-members, meet them, or even hear of them, yet in the minds of each lives the image of their communion”. Nation building can be understood as the task of fostering this “image of communion”—where shared values and preferences among citizens would be strong enough to glue them together as a nation—through the promotion of a shared national identity (Alesina and Reich, 2015). This task is bound to be daunting in a nationally-diverse, yet locallyhomogeneous country like Indonesia, especially given the little shared history among its peoples. Officials took the first step toward this objective by politically agreeing on the meaning of a nation in the 1928 Second Youth Congress, where they pledged to create “satu nusa, satu bangsa, satu bahasa” (one fatherland, one nation, one language). This pledge defined the nationalist leaders’ nation-building agenda, namely, the creation of a nation “unified by ties of common language, common outlook, and common political participation, a people enthusiastically severing its outworn ties to local traditions and loyalties . . . and the creation of . . . [an] all-Indonesian culture” (Feith, 1962/2007, pp. 34-35). National unity became one of the state ideology’s Five Key Principles (Pancasila), and “Bhinneka Tunggal Ika” (Unity in Diversity) is the state motto inscribed on the nation’s coat of arms. Indeed, as noted by Feith (1962/2007, p. 34), nation building “was probably the central goal which the nationalist leaders believed should and would be realized with the attainment of independence.” P 2 The ELF index equals 1 g ⇡g where ⇡ is the share of group g in the village. Villages (desa or kelurahan) comprise the lowest level of governance in Indonesia with an average population of over 2,000 (7,000) in rural (urban) areas in the early 2000s. They are the main administrative unit of analysis in our study. 9 As noted by Ricklefs (2008, p.189): “In 1905. . . [a sense] of a common Indonesian identity or of common goals simply did not yet exist. Most Javanese, for instance, neither knew nor cared about what happened in Aceh, except for those who were fighting beside the Dutch to destroy its independence.” 8 6 2.1 The Nation Building Process Nation building is a process of promoting a shared national identity, where identity can be viewed as a type of “capital”. Here, we propose a stylized framework to clarify how intergroup contact at the local level can affect this process through its influences on individuals’ social choices. We draw upon insights from the Lazear (1999) model on language and cultural assimilation, adding a common national identity that is persistent, following models of habit formation (Becker and Murphy, 1988) and the evolution of brand preferences (Bronnenberg et al., 2012). To fix ideas, consider a discrete choice model in which individual i can choose between speaking her own native language at home (segregate) or a national language (integrate). Individual i’s preference has an idiosyncratic component and a common component shared by all citizens in the country. This common component represents a stock of national identity “capital” that persists and builds upon past experiences. The more she speaks the national language, the more she (and her children) identifies as Indonesian, and the more important the national identity becomes as a determinant of social choices. Individual i chooses the optimal language by weighing marginal costs and benefits. Costs depend on how different the native language is from the national language. Benefits depend on the relative importance of idiosyncratic and national components of identity, as well as the potential gain from intergroup contact.10 Benefits from contact include both economic and social exchanges that are better intermediated when all parties speak a common language. In a diverse village, she may choose to speak the national language if the utility gain from speaking it and from intergroup contact outweighs the costs of speaking a non-native language. The insights are similar if we extend to many native languages and a common national language. In this case, the national language may be preferred if adopting it costs less than learning the other group’s native language or if there are benefits for all groups to coordinating around a “neutral” language, such as in highly-fragmented villages with many minority languages (Lazear, 1999). There could also be spatial spillovers associated with speaking the national language (relative to the local majority’s language), which increases the potential for economic and social relationships beyond the village. Ultimately, the nation builders’ objective is to increase the stock of national identity “capital” to promote integration. In terms of language, this involves facilitating conditions that raise the benefits and reduce the costs of speaking the national language at home. Doing so not only increases the current stock of national identity capital but also the future stock as parents socialize the identity to their children, thereby fostering an intergenerational process of integration. 2.2 Identity and Language Policy National language policy can be an important vehicle to advance nation-building objectives.11 Notably in the case of Indonesia, choosing a minority language as the national language anticipated some of its nation-building challenges. Almost all of the nearly 700 languages currently spoken in Indonesia belong to the Austronesian language family, but many are very different from one another, and the differences 10 While our framework captures interactions under peaceful conditions, diversity and language choices may have implications for conflict insomuch as these choices reinforce intergroup divisions (as in the model of Esteban and Ray, 2011a). 11 This is a central theme of several edited volumes on the role of language policy in shaping national identity in a range of rich and poor countries across Europe (Barbour and Carmichael, 2000), Asia (Simpson, 2007b), and Africa (Simpson, 2008). 7 are particularly large across the Inner–Outer Island divide. The national language, Bahasa Indonesia, or Indonesian, is a modified version of Malay that originated along the eastern coast of Sumatra (and peninsular Malaysia) but had been used as a trading language in the archipelago for centuries. Prior to its recognition as the national language at the 1928 Youth Congress, Malay was only spoken as the native language by 5 percent of the population living under Dutch colonial authority, whereas nearly 40 percent spoke Javanese. By unanimously choosing a minority language, the delegates of the congress avoided the resistance of non-Javanese ethnic groups and signaled their commitment to political unity. Its status as the national language was later cemented in the 1945 Constitution. Subsequent policies leveraged the national language as part of broader nation building efforts. Widely viewed as “a symbol of national unity and identification” (Sneddon, 2003), policymakers promoted widespread adoption of the Indonesian language, in the hope that “the more [the Indonesian people] learned to express themselves in Indonesian, the more conscious they became of the ties which linked them” (Alisjahbana, 1962). Indonesian was established as the language for official communication and was incorporated in the national curriculum of a rapidly expanding education system (Suryadinata, 1988). Many outsiders view Indonesia’s national language policy as exemplary (Simpson, 2007a).12 Nevertheless, despite nearly universal knowledge of Indonesian today, less than 20 percent of households use it as the primary language at home, according to the 2010 Census. 2.3 Nation Building Through Transmigration Some policymakers also saw the nation-building potential of resettlement programs. Planners saw the Transmigration program as a means to encourage intergroup contact between Inner and Outer Islanders and promote the formation of a national identity (Kebschull, 1986; MacAndrews, 1978).13 In speeches and policy documents, officials allude to the program’s role in enhancing integration. For instance, in 1985, the Minister of Transmigration, stated “By way of transmigration, we will try to ... integrate all the ethnic groups into one nation, the Indonesian nation. The different ethnic groups will in the long run disappear because of integration and there will be one kind of man, Indonesian” (Hoey, 2003). However, the program reignited suspicions of a “Javanization” agenda in the Outer Islands (see, e.g., Hoshour, 1997; Mangunrai, 1977). Echoing discord from the early days of independence, there were questions of whether Transmigration was a vehicle for cultural imperialism over Outer-Island ethnic groups or a way for Suharto’s government to solidify power in frontier regions (see, e.g., Charras and Pain, 1993; Levang, 1995). These concerns reflect the common unease among indigenous, “sons of the soil” minority ethnic groups experiencing rapid immigration of majority ethnic groups from the political and economic center of the country. From a nation-building perspective, though, it is important to note that the Javanese and other native Inner-Island groups were not more likely to be standard bearers of Indonesian identity at the time of the program. This is important to keep in mind as we aim to understand how changes in diversity affect convergence toward new forms of shared identity. 12 To cite Paauw (2009): “[No] other post-colonial nation has been able to develop and implement a national language with the speed and degree of acceptance which Indonesia has. No other national language in a post-colonial nation is used in as wide a range of domains as Indonesian, a feat made more impressive by the size and ethnic, linguistic and cultural diversity of Indonesia.” 13 Discussing the program objective, World Bank (1988, p. 5) noted: “[Transmigration] has been seen by national leaders as a tool for national integration . . . [and] as a means of promoting cultural contact and building national unity.” 8 3 Transmigration: Program Design and Implementation We focus on the Transmigration Program during the third and fourth Five-Year Development periods (or Pelita) from 1979–1988 under Suharto. During this period, the Suharto government massively expanded the program to relieve perceived over-population pressures in the Inner Islands and underdevelopment in the Outer Islands. The program provided free transport to the newly created settlements as well as housing and two-hectare farm plots. A total of 1.2 million people were resettled in Pelita III, and an additional 3.75 million people were planned to be resettled in Pelita IV. Transmigrants volunteered for the program. The program targeted nuclear families for resettlement, and couples had to be legally married, with the household head between 20 and 40 years of age. In practice, most participants were poor, landless agricultural laborers, with few assets, and limited schooling (Kebschull, 1986). These government-sponsored migrants are more comparable to stayers than to typical voluntary migrants. On average, Java/Bali-born individuals who moved to Transmigration villages had around 0.7 fewer years of schooling compared to stayers in their origin district in Java/Bali (based on the 2000 Population Census). By comparison, those who moved to urban areas or other rural areas of the Outer Islands had 2.4–3.2 more years of schooling compared to stayers. Nevertheless, our main analysis compares transmigrants across resettlement villages, thereby differencing out the common component of selectivity across program participants. Below, we describe how the program provides plausibly exogenous variation in ethnic diversity across Transmigration settlements with further details on the program described in Online Appendix C. 3.1 Transmigrant Assignment and Ethnic Diversity The program’s rapid expansion in Pelita III and IV contributed to an as-if-random initial assignment of transmigrants, as planners endeavored to meet the annual target of settlers determined by the central government. As a result of the scale and pace of implementation, institutional coordination issues and information problems were rife, with many reports describing a “plan-as-you-proceed” approach (World Bank, 1988). Coordination problems between government agencies made it infeasible to systematically match transmigrants to settlements. One agency was responsible for recruiting transmigrants in the Inner Islands, while another was tasked with clearing sites in the Outer Islands. The allocation of transmigrants was driven by the coincidental timing of transmigrants’ arrival to transit camps in Java/Bali and the opening of settlements in the Outer Islands. Participants could not choose their destinations and were often ill-informed about the conditions they would face (Kebschull, 1986). Moreover, official guidelines stipulated that a certain portion of land in each new village was to be allocated specifically to Outer Islanders from nearby areas within the same province. This generated further variation in initial diversity. In 1979, this share—officially known as Alokasi Pemukiman bagi Penduduk Daerah Transmigrasi (APPDT)—was stipulated by the government to be 10 percent, and it was increased to 20–25 percent in 1982. However, in practice, these shares tended to vary across locations (Clauss et al., 1988; Rigg, 2013).14 14 While there is limited information on APPDT, anecdotal evidence suggests there is some de facto geographic variation. For example, Tanasaldy (2012, p. 191) notes cases in West Kalimantan where villages had 50 or even 80 percent. The 2000 Population Census data bears out this variation, revealing an average 15 percent gap in the Outer-Island ethnic share between villages created during each period along with additional mean differences across broad regions. 9 Once transmigrants and APPDT natives arrived, land and housing within settlements were assigned by lottery. Over time, some settlements merged with adjacent villages, and others were split along hamlet boundaries (the next administrative unit below the village). Settlements fell under the jurisdiction of the National Ministry of Transmigration, which enforced centralized rules governing the formation of villages, all of which would be endowed with the same initial institutions and public goods.15 Together with the lottery, these rules help mitigate the concern that village boundaries are endogenously correlated with ethnic relations, an issue we revisit in robustness checks in Section 5.3.16 As we show in Section 5.1, these program features helped induce persistent diversity across Transmigration villages. 3.2 Site Selection and Carrying Capacity According to the 1978 Transmigration Manual, planners were concerned about food security and developed models to estimate the carrying capacity of each settlement in terms of population. The goal was to ensure transmigrants could eventually use their two-hectare farm plots to produce enough food to overcome subsistence. Officials worked with agricultural experts to map the elevation, vegetation, soil types, hydrology, climate, market access, and locations of settlements. They determined the potential population of each settlement based on these site selection characteristics and the availability of arable land. In Section 5.1, we exploit this feature to develop an instrumental variable (IV) strategy that uses the initial number of Inner-Island transmigrants to instrument for the current Inner-Island ethnic share. Before establishing new Transmigration settlements, planners used a three-stage process to select potential sites that were sparsely populated and had agricultural potential. First, potential regions were identified using large-scale maps capturing basic information about topography, market access, and existing settlements. Second, aerial reconnaissance identified “recommended development areas” (RDAs) based on agroclimatic conditions and nearby indigenous populations. Finally, local surveys of these conditions helped determine the total number of transmigrants to be allocated to the settlement. In Section 6, we use a place-based evaluation strategy and a subset of these planned settlements (RDAs) as counterfactuals to estimate the average impact of the program on demographic change and nation building in the Outer Islands. 4 Data This section discusses our main data sources. First, we use a newly digitized 1998 Transmigration Census and planning maps to identify settlements and initial assignments. Second, we draw upon the 2000 Population Census to measure ethnic diversity and residential segregation. Third, we draw upon multiple datasets to measure social choices capturing integration. These include national language use at home as well as interethnic marriage and linguistic identity among children. Finally, we provide empir15 During this time, the creation of new villages followed the 1979 Village Law, a set of rules stipulated by the centralized government to ensure that most villages have minimum population sizes, similar institutions, and access to a basic set of public goods. By comparison, as part of a 2004 Village Law revision, adjustments to village boundaries could arise with more locally tailored adjustments and hence greater scope for endogenous ethnic segregation. 16 Without the initial lottery assignment, endogenous settlement could lead to diverse hamlets (with tolerant people) and also segregated ethnic enclaves. When hamlets mature into villages, the initial settlement could then give rise to a spurious correlation between ethnic shares and unobserved tolerance. 10 ical evidence to motivate these outcomes as proxies for the intergenerational process of nation building. Appendix D provides further background on the data and variable construction. 4.1 Transmigration Census To identify Transmigration villages, we digitized the 1998 Transmigration Census, produced by the Ministry of Transmigration (MOT). For each settlement, this dataset provides the number of transmigrant individuals and households assigned by the program as well as location information. Using these data, we identify 911 Transmigration villages (outside of Papua) established from 1979 to 1988. These villages received between 350 and 8,500 transmigrants (an average of 1,872) in the initial year of settlement. We also rely on several geospatial data sources (detailed in Appendix D) to measure the characteristics used to determine carrying capacity of settlements. As shown in Figure 1, Transmigration settlements are scattered throughout the Outer Islands. More than half of these sites are located on the island of Sumatra, but many are found on Kalimantan and Sulawesi. This allows for a within-island analysis that accounts for the vast socioeconomic differences across these large island groups. 4.2 Ethnic Diversity Our primary measure of ethnic diversity is the share of individuals in a village that report an Inner-Island ethnicity. This measure is directly influenced by the program, is the leading source of variation in diversity within Transmigration settlements, and captures one of the primary ethnic cleavages in Indonesia. The Inner–Outer divide is salient in Transmigration settlements, with natives referring to transmigrant ethnic groups from Java/Bali as pendatang, or newcomers. To construct measures of diversity, we draw on the universal coverage 2000 Population Census microdata that reports a single ethnic identity for every individual at a fine geographic level (census blocks).17 Transmigrants and their descendants comprise nearly all of those reporting Inner-Island ethnicities in Transmigration settlements.18 Overall, the variation in ethnic diversity in Transmigration villages is explained largely by the Inner– Outer divide and ethnic divisions among transmigrants. We show this in Appendix Figure A.1, which depicts a stark inverted-U relationship between the Inner-Island ethnic share and overall ethnic diversity captured by the ELF index. Using a Shapley decomposition, we find that the (quadratic) Inner-Island ethnic share explains 70 percent of the variation in the ELF index. Another 25 percent is explained by ethnic divisions among Inner-Island ethnicities (i.e., ELFInner ) with the small remainder explained by divisions among Outer-Island ethnicities (i.e., ELFOuter ). These patterns suggest that diversity in a typical transmigrant village can primarily be explained by the influx of Inner Islanders. Local APPDT natives are typically a more homogenous group hailing from a smaller set of nearby Outer-Island villages 17 The 2000 Census allows individuals to self-identify with one of more than 1,000 different ethnicities. The 14 Inner-Island groups include all of those native to Java/Bali with the top four—Javanese, Sundanese, Madurese, and Balinese—comprising nearly 99 percent of Inner Islanders in study areas. Meanwhile, the top 50 Outer Island ethnicities in study villages comprise around 80 percent of Outer Islanders in these areas. Although many Outer Island groups are relatively small nationally, they are relatively large in many Transmigration areas. Note that the 2000 Census round was the first Census since 1930 to report ethnicity, and that the publicly available 2010 Census data only reports information on ethnicity at the district level. 18 According to a Shapley decomposition, those born in Java/Bali explain 51 percent of the variation in the Inner-Island ethnic share while their second-generation kin—those born within the same district as reported in the Census—explain 41 percent. 11 than the transmigrants who, in a typical settlement, come from 45 origin districts across Java/Bali. While we primarily focus on the Inner–Outer ethnic divide in Transmigration settlements, we also leverage the full granularity in ethnic identity, focusing on ELF and ELFInner in additional checks. Finally, as a way of proxying for the extent of local contact, we also study residential segregation between Inner and Outer Islanders. To measure segregation, we use the standard Bell (1954) isolation index applied here to census blocks within villages. This measure exploits fine block-level geographic detail to study within-village segregation patterns. Appendix Table D.2 provides summary statistics for these and other measures. 4.3 Integration and Nation Building Outcomes We consider three outcomes aimed at capturing local integration as part of the long-run nation building process: language use at home, children’s mother tongue, and interethnic marriages. These measures are in line with the view of language and marriage decisions as leading indicators of culture (see Abramitzky et al., 2015; Giuliano and Nunn, 2017). Data and Measurement. Our main nation-building outcome is the use of Indonesian at home. Lan- guage use at home often reflects a fundamental socialization decision by parents to inculcate specific cultural preferences in children. By primarily using Indonesian at home, parents instill in their children a common national identity, instead of their respective ethnic identity. Importantly, unlike language ability or daily use, home language use is less likely to reflect purely economic motives.19 We also observe whether individuals choose to primarily speak a different ethnic language at home. By revealed preference, Indonesian use at home can therefore be viewed as a choice to invest in a common national identity relative to ethnic identities. From the nation building perspective, though, it is less important to distinguish whether national language use at home was initially motivated by economic or social incentives. What matters is how policy-induced diversity shapes that choice. For the main analysis, we use individual-level data from the 2006 National Socioeconomic Survey (known as Susenas), which asks the household head about his/her ethnicity and primary language used at home. To increase the number of village observations given the limited sampling frame of Susenas, we construct a sample that includes villages just beyond the original Transmigration settlements.20 Our analysis is ultimately based on 2,126 household heads in 135 villages, 22 of which constitute original 19 According to the 1995 Intercensal Population Survey described below, 95 percent of individuals in Transmigration areas reported ability to use Indonesian. One potential concern, though, is that parents choose to speak Indonesian at home primarily as a means of helping their children succeed in primary school. Beeby (1979) suggests that even as early as the 1970s, this would not have been a key concern: “Recent systematic research on students’ achievements in four subjects in grade 6 throughout Indonesia has confirmed that constant or frequent use of Bahasa Indonesia in the home does give some advantage to students at this level; but the difference between them and the rest is much less than one might have expected. The advantage is, naturally, greatest in the language test, but disappears in the tests on mathematics and science.” Moreover, to the extent that these parental inclinations are unrelated to diversity, this concern will not confound our interpretation. Below, we find similar results for household heads with high and low levels of education, which is also consistent with home language choices reflecting cultural values and preferences rather than mere ability. 20 The survey covers a random sample of around 15–20 percent of villages. The samples are drawn proportional to district population size, and because Transmigration settlements are in underdeveloped areas, they tend to be undersampled relative to a simple random draw of villages. Our sample expansion is supported by evidence in Appendix B.II showing that the Inner-Island ethnic population exhibits significant spillovers to villages within 10–15 km of the original Transmigration settlements in the 1998 MoT Census. 12 Transmigration settlements and the remainder being within 10 km of those settlements. Additionally, we use individual-level data from the 1995 Intercensal Population Survey (known as Supas) to examine social and familial transmission of identity. Supas has greater coverage than Susenas and also allows us to explore intrahousehold heterogeneity in primary home language as well as mother tongue. Notably, household members aged 5 and older respond to these language questions individually. Our Supas sample comprises 28,532 individuals in 422 villages, including 109 original Transmigration settlements and the remainder coming from within 10 km of those settlements. With Supas, we can address concerns about self-selection and endogenous sorting using its detailed migration questions. Its drawback, which prevents us from using it in our main analysis, is that the survey was conducted five years prior to ethnicity being collected in the 2000 Census. To account for this, in all analysis based on Supas, we use measures of ethnic diversity that are calculated based only on the 2000 village residents in the Census that do not report living elsewhere in 1995. Finally, we investigate intermarriage rates between Inner- and Outer-Island ethnics. Intermarriage has long been viewed by social scientists as a key marker of assimilation (see Gordon, 1964), and as Babcock (1986) notes, officials in the Ministry of Transmigration monitored marriage between Inner and Outer Islanders as a barometer for successful integration. We use the Population Census to calculate intermarriage rates for 932,642 people spanning 832 Transmigration villages. For each household head, we can identify their marital status as well as the ethnicity of their co-resident spouse. We focus on young cohorts plausibly married after the program began. Nation Building in the Long Run. We marshal evidence from two independent surveys with measures of group affinities to argue that national language use at home and growing up with multiethnic parents contribute to an intergenerational process of nation building.21 First, using the 2009 Asian Barometer survey, a cross-sectional analysis shows that home use of Indonesian is associated with a stronger national affinity. Conditional on age, gender, education and region fixed effects, individuals that primarily or exclusively speak Indonesian at home are 10 p.p. more likely to choose the national identity over their ethnic identity, relative to a mean of 63 percent.22 Second, using panel data from the Indonesia Family Life Survey (IFLS), we show how Indonesian use at home and intermarriage may improve national unity and weaken ethnic attachment. The rich outcomes and long panel of the IFLS allow us to follow children growing up in households where Indonesian is spoken at home and observe their language and identity choices as they form new households more than a decade later. To do this, we begin by taking the sample of individuals observed in 1997 that subsequently formed new households by 2014. We construct an indicator for whether they spoke Indonesian daily at home during their childhood. Of all of the 1997 households in the IFLS, only 27 percent did so. We further control for whether the child’s parents are from different ethnic groups. We 21 Although both surveys contain several rich outcomes of interest, their geographic coverage is either too sparse or unavailable at the village-level, which is required for empirical analyses of Transmigration settlements scattered across the archipelago. Moreover, World Values Survey data used, for example, by Desmet et al. (2016) also has questions on national affinity, intergroup tolerance, and preferences, but it does not include geographic identifiers at the village level and only has very coarse measures of Indonesian ethnicities. 22 The question is stated as follows: “Let us suppose you had to choose between being an Indonesian and being [own ethnic group], which of these do you feel most strongly attached to?” The declarative responses include “Indonesian”, “Own Ethnic group”, and “Another Identity”. 13 then correlate these indicators with four nation-building outcomes that capture an array of social identity decisions and preferences in 2014. We control for age, gender, education, and village fixed effects to focus the comparisons across observably similar individuals in the same local community. Overall, the results in Panel A of Table 1 consistently reveal that children who grow up in households where they speak Indonesian at home tend to have significantly weaker ethnic attachments and are more likely to embrace the national identity. Individuals growing up in such households are nearly 50 percent more likely to speak Indonesian at home in their new households (column 1). They are more likely to self-identify with a different ethnicity in 2014 than in 1997, reflecting a more fluid self-concept of ethnic identity (column 2). Additionally, they are around 55 percent more likely to marry someone who is not a member of their own ethnic group (column 3) and are significantly less likely to show discriminative trust toward co-ethnics (column 4). Panel B shows that these patterns are not driven solely by individuals that grew up in multiethnic households. Controlling for parental interethnic marriages leaves the coefficient on daily Indonesian use at home as a child unchanged, while itself entering positively and significantly across all four outcomes. Together, these patterns show how using Indonesian at home may help break down ethnic attachments and hence play an important role in socializing new forms of shared national identity across generations. 5 Local Diversity and Nation Building In this section, we use variation in ethnic diversity across Transmigration areas to identify the long-run impact of local diversity on national integration, as proxied by the choice of home language. We organize our analysis as follows. First, we develop an identification strategy exploiting initial transmigrant assignments. Second, we present baseline results on diversity and language use at home. Third, we offer an array of identification and robustness checks. Fourth, we present several results clarifying the conditions under which diversity fosters integration. Finally, we document the role of community and familial diversity in shaping the intergenerational transmission of national identity. 5.1 Estimating Impacts of Diversity on Integration To capture the relationship between local diversity and integration, we estimate the following semiparametric regression function: ` yij = ↵ + g (diversityj ) + x0j + "ij , (1) ` is an indicator for whether individual i in Transmigration location j primarily speaks language where yij ` at home, g(·) is a function of Inner-Island ethnic share or overall ELF in 2000, and xj is a vector of controls. We estimate equation (1) semiparametrically, following Robinson (1988). We use a local linear estimator with the Fan and Gijbels (1996) rule-of-thumb (optimal) bandwidth and an Epanechnikov kernel, but results are similar using other specifications. In general, estimating this relationship with observational data presents several empirical challenges. First, people’s strong tendency to self-segregate into ethnic enclaves often results in limited intergroup contact and limited variation in local diversity (McPherson et al., 2001). Second, diverse communities tend to be confounded with other omitted variables, such as market access, favorable environments, or 14 a history of harmonious intergroup relations. Third, intergenerational identity transmission tends to be a slow process and confounded by time trends. The Transmigration program allows us to address these empirical challenges. Features of the program discussed in Section 3.1 generated a continuum of ethnic diversity across the newly constructed villages, while migration frictions and land-market imperfections sustained these initial diversity shocks.23 Figure 2 summarizes this persistent variation by plotting the kernel density of village-level ELF across Transmigration program (solid line) and non-program (dashed line) villages. Non-program villages tend to be less diverse; their ELF distribution is skewed to the right and has a relatively low mean. By contrast, the kernel density for Transmigration villages reveals a continuum of diversity.24 Notably, there is a significant mass of Transmigration villages with relatively high ELF. In typical settings with greater labor mobility, segregation and tipping forces would have rendered such diverse places unstable. To deal with potential endogeneity of diversity in 2000, we develop an instrumental variables (IV) strategy that isolates the initial, policy-driven variation in ethnic shares. We use a flexible function of the number of transmigrants placed from 1979–88 within 10 km of village j as an IV for the Inner-Island ethnic share in village j. To proxy for the policy rule determining potential population in each settlement, we control for characteristics used by planners to determine a site’s carrying capacity such as soil attributes and topography (i.e., the x vector, see Section 3.2). Conditional on these characteristics and hence predicted potential population, a larger initial transmigrant allocation implies a higher InnerIsland ethnic share. By capturing ex-ante diversity, the IV helps rule out endogeneity arising from sorting after the initial program allocations. When considering overall diversity (ELF), we can augment the instrument set to include the ELF index among Inner-Island ethnicities, which is both plausibly exogenous and explains the bulk of remaining variation in the overall ELF as noted in Section 4.2. Figure 3, estimated using a flexible first stage, shows that the initial assignment of transmigrants strongly predicts Inner-Island ethnic shares in 2000. This strong relationship is consistent with barriers to mobility making it harder for settlers to leave their initially-assigned communities. Together, these frictions limited tipping, as evidenced by the roughly (log-)linear relationship. Moreover, ethnic residential patterns within villages are similarly persistent. The isolation index for the older generation of household heads (i.e., initial settlers assigned houses by lottery) is correlated at around 0.9 with that of the younger generation (i.e., initial settlers’ children in new households).25 This persistence is largely explained by typical inheritance norms in rural areas where land is passed on to children who then form their own households in plots adjacent to their parents. The initial-transmigrants IV is not only strong but also plausibly excludable. The key identifying assumption is that planners did not initially create more diverse settlements in communities that were unobservably more receptive to integrating. Figure 4(a) provides initial supportive evidence, showing that our instrument is orthogonal to the linguistic similarity between the average Inner Islander and the indigenous Outer-Island group. Linguistic similarity adds a distance metric to ethnic differences and 23 Because transmigrants were mostly landless laborers, the gift of land may have tied many of them to the new settlements. Migrants did not receive property rights immediately, and land sales were also limited by a 10 percent transaction tax (World Bank, 2008), presenting additional barriers to ex post migration as found in other contexts (see De Janvry et al., 2012). 24 Figure A.2 presents similar patterns for residential segregation across ethnic groups within villages, where Transmigration villages exhibit significantly less segregation between Inner- and Outer-Island groups than do non-program villages. 25 We define the younger generation as those individuals who were under 16 years of age during the period of settlement in the 1980s, but results are unchanged using other cutoffs. 15 is based on language classification trees reported in Ethnologue (see Appendix D). The mostly flat curve mitigates the concern that planners systematically sent transmigrants to destinations based on linguistic and hence cultural proximity to transmigrants. Moreover, Figure 4(b) shows that the instrument is orthogonal to post-program immigration between 1995 and 2000. This addresses the concern that planners created more diverse communities in places that naturally attract diversity-seeking, tolerant individuals. Further results supporting instrument validity and consistent reduced-form evidence are presented below. We turn now to our baseline results. 5.2 Diversity and Language Use at Home Figure 5 reveals a significant inverted-U relationship between national language at home and the share of Inner-Island ethnicities in the village. As discussed, the shape could be an U, inverted U, or a flat line, depending on whether the incentives to integrate, segregate, or assimilate prevail in the middle. An inverted-U shape is consistent with strong incentives to segregate or assimilate when there is a clear majority and strong incentives to integrate in places with an equal mix. Indeed, the fraction of the population speaking Indonesian as the primary language at home increases with the proportion of InnerIsland natives residing in the village but starts to decline right above 40 percent. The parametric test due to Lind and Mehlum (2010) suggests that the turning point and inverted-U shape are significant at the 1-percent level. Reassuringly, a similar analysis using the 1995 Supas data for another subset of Transmigration areas also shows an inverted-U relationship (Appendix Figure A.5). The roughly symmetric shape reflects similarity between Inner and Outer Islanders in the elasticities of Indonesian use with respect to diversity.26 For example, if Outer Islanders were more responsive to using Indonesian at home as diversity increases, we should see a steeper slope to the left, where the Outer Islanders are the majority. The symmetry and inverted-U relationship are inconsistent with the views that ethnic polarization is conducive to social disintegration, and the Transmigration program was simply a vehicle for Javanese cultural imperialism. We further clarify the origins of the inverted U by analyzing language use at home separately for Inner and Outer Islanders in Appendix Figure 7. The top panel restricts to Outer Islanders only. The three panels from the left to the right reflect an Outer Islander’s choice to speak Indonesian (integrate), an Inner Island language (assimilate), or an Outer Island language (segregate). First, the top-left panel shows that Indonesian use at home among Outer Islanders increases with more exposure to Inner Islanders. This line does not flatten, which would be the case if the incentive to integrate dissipates once they have enough co-ethnic neighbors to sustain a segregated community. The linear patterns for Indonesian use at home by both groups explains the symmetric inverted U when pooling groups together. Moreover, the linearity for both groups, which we cannot reject using the Härdle and Mammen (1993) test, suggests that the inverted-U shape is not an artifact of more tolerant types from each group being disproportionately likely to reside in diverse communities. Otherwise, we would find inverted-U shapes for each group separately as well. In the middle panel, we see that the Outer Islander’s choice to assimilate and speak the Inner-Island 26 The slightly flatter slope and higher intercept on the left is consistent with the higher levels of overall diversity among villages in the lower tail of the Inner-Island ethnic share compared to the upper tail, as seen in Appendix Figure A.1. The role of other ethnic divisions in explaining language use is made explicit in other results below based on the overall ELF index. 16 language increases nonlinearly at around 50 percent, consistent with network externalities. Native Outer Islanders begin to take on Inner-Island languages at home once Inner-Island ethnic groups constitute the majority in the village. Finally, the top-right figure shows a clear linear and monotonic relationship with more Outer Islanders choosing to segregate and speak their own language at home as their share increases. This pattern suggests a moderate form of ethnic attachment. If villagers immediately selfsegregate once they have enough co-ethnics, the propensity to speak their own language should increase nonlinearly towards one, mirroring the inflected shape for the out-group language. The bottom panel shows analogous patterns of language use at home among Inner Islanders. Once more, analysis using the 1995 Supas data reveals broadly similar patterns (see Appendix Figure A.6). Table 2 presents parametric OLS and IV estimates of the main inverted-U relationship. We begin in columns 1 and 2 with a quadratic specification of the Inner-Island ethnic share.27 Column 1 presents the parametric version of the partially-linear results in Figure 5. In column 2, we approximate a nonlinear first stage by instrumenting for the Inner-Island ethnic share using ventiles of the number of initial transmigrants within 10 km (i.e., 20 dummy variables with equal numbers of villages in each bin). These instruments provide a relatively strong first stage and satisfy overidentifying restrictions.28 The implied turning point for the inverted U is similar between the OLS and IV estimates. Overall, the similarity between OLS and IV estimates points to the persistent impact of the initial wave of settlers on diversity levels observed up to two decades later in these newly-formed communities. To provide a sense of magnitudes, we estimate analogous specifications in columns 3 and 4 based on terciles of the InnerIsland ethnic share. In the middle tercile, households are 18.7 p.p. more likely to use Indonesian at home than in the bottom and top tercile. This is a large differential relative to the mean of 25 percent. Reduced form results provide additional support for these findings. Figure 6 reveals an inverted-U relationship between Indonesian use at home and the initial transmigrant assignment, using the same semiparametric approach as in the OLS specifications above. Column 7 of Appendix Table A.1 corroborates this pattern using a parametric tercile specification. Together, the results thus far point to a causal effect of ethnic diversity on integration at the local level. Appendix Table A.1 shows that this core finding is robust to different diversity measures. First, we find that different measures of ethnic fractionalization (ELF)—defined based either on the dichotomous Inner/Outer-Island ethnic categories (column 3) or the full set of ethnic categories (column 4)—also exhibit a strong positive relationship with national language use at home. Finally, columns 5 and 6 exploit plausibly exogenous variation in ethnic diversity among the Inner-Island ethnic population arising from the arbitrary allocation process that sent transmigrants from many different Java/Bali origins to the same transit camps (see Appendix C).29 The ELF index among Inner-Island groups in column 5 and the 27 This is supported by a Härdle and Mammen (1993) test that fails to reject the null hypothesis of a quadratic shape in Figure 5. We use generalized method of moments (GMM) to account for the many instruments and cluster standard errors at the district level, of which there are 50. At the bottom of the table, Sanderson and Windmeijer (2016) Wald statistics reject the null of weak instruments on the two endogenous variables. Instrumenting with a smaller number of bins 10 yields similar albeit slightly noisier results. Based on the Hansen (1982) test, we cannot reject the null hypothesis that the instruments are uncorrelated with the error term and are correctly excluded from the second stage. Coupled with the rejection of the null under the Anderson and Rubin (1949) test (that the coefficients on the endogenous variables jointly equal zero and the overidentifying restrictions are valid), these diagnostics point to a fairly well-specified IV model. 29 The OLS results in columns 3 and 4 survive IV specifications where in column 3 the instruments include the same 20 dummy variables as in Table 2, and in column 4 we augment that instrument set to include the ELF among Inner-Island-born individuals, thereby capturing the additional diversity induced by the haphazard allocation process. Additionally, Appendix 28 17 quadratic Javanese share among Inner-Island groups in column 6 both point to greater home use of the national language in the most diverse communities. Overall, the findings in this section provide new evidence on the relationship between local diversity and nation building. We now subject these results to a host of robustness and identification checks that not only strengthen the credibility of these findings but also bolster our interpretation of how diversity influences national identity formation and cultural change. 5.3 Addressing Threats to Identification This section rules out several potential threats to identification. In Table 3 and accompanying results in Appendix A, we provide a series of robustness checks to rule out confounding explanations for national integration in diverse Transmigration areas. As a reference, column 1 of Table 3 reproduces the baseline IV specification for the quadratic Inner-Island ethnic share from Table 2. Endogenous Initial Assignment. In column 2, we show that the inverted-U relationship is robust to including fixed effects (FE) for the ethnolinguistic homelands native to each village. These FE restrict the identification to be across villages within the same broad ethnolinguistic region reported in Ethnologue. This reduces the concern that the inverted U is driven by more diverse settlements being created in regions where the local ethnic group is more culturally similar to and hence tolerant of Inner-Island ethnic groups.30 As further evidence for the IV exclusion restriction, Appendix A.II documents the lack of correlation between the IV and predetermined district-level measures of political and economic development not explicitly used for site selection but potentially known to planners at the time. These include home use of Indonesian in the late 1970s as well as other variables potentially correlated with both diversity and national identity in areas near the eventual settlements but prior to their creation. These orthogonality results are unaffected by the inclusion of year-of-settlement fixed effects, which suggests that planners did not systematically adjust the assignment mechanism over time. The IV is also uncorrelated with contemporaneous religious diversity as well as the skill and occupational mix of the older Inner-Island population. This latter result is consistent with column 3 in Table 3, which shows that the inverted-U relationship between Indonesian use at home and Inner-Island ethnic share is robust to including an exhaustive set of occupation fixed effects. There is, therefore, little evidence to suggest that policymakers systematically created more diverse settlements in initially more well-suited locations. Clarifying the Role of Baseline Controls. Given that we rely on non-experimental variation in diver- sity, it is important that our results do not depend entirely on the inclusion of control variables. Column 4 shows robustness to excluding the village-level control variables, xj , used to select sites and determine carrying capacity. However, note that excluding these variables leads to larger IV estimates (i.e., steeper slopes on both sides of the inverted U), which is intuitive as they capture some of the confounding Figure A.7 reveals a nonlinear relationship between overall ethnic diversity and national language use at home. The sharpest increase occurs in villages where there is more than a 50 percent chance of encountering a non-coethnic neighbor, suggesting that ethnic mixing above and beyond the Inner–Outer division generates further integration. 30 This also mitigates concern that planners assigned greater diversity to settlements in coastal areas of Sumatra and Kalimantan, home to the Malay ethnic groups whose native language is the one upon which Indonesian is based. 18 variation between natural advantages and diversity. Column 5 excludes the individual-level controls for age, education, and gender of the household head, resulting in no change relative to the baseline in column 1. Finally, column 6 excludes all variables, and again leaves the key result intact. Sorting and Compositional Differences. Naturally, an important concern is that the stronger inte- gration in more diverse communities simply reflects the sorting of more tolerant people. We begin by ruling out the role of schooling and recent immigration as potential mechanisms driving our key results. On the former, as just discussed, column 5 shows that the results are unchanged when we omit the respondent’s level of schooling. Furthermore, Appendix Table A.2 shows that the inverted-U relationship is similar for individuals with different education levels. This suggests that prolonged exposure to the national language in schools (see Section 2.2) cannot explain the inclination to use that language at home in diverse communities. Next, we demonstrate a similar robustness when dropping villages that exhibit high levels (above the 90th percentile) of recent immigration between 1995 and 2000 in column 7 of Table 3. Since this post-program immigration measure and our IV are orthogonal (see Figure 4), this result provides suggestive evidence that ex post sorting into Transmigration areas is not driving the results.31 Furthermore, in column 8 of Table 3, we address the concern that as settlements split into multiple villages (e.g., due to population growth), the new, endogenously created village boundaries would sort existing villagers on their tolerance for national integration. Given the initial lottery assignment of plots within the original settlements, such endogenously-formed villages would need to have relatively more complex boundaries in order to spatially concentrate diverse, tolerant types into a single administrative unit. Following the fractal dimension approach in Alesina et al. (2011), we find that the centrally-planned Transmigration villages have relatively straight borders, suggesting relatively more exogenous boundaries, compared to non-program villages in Indonesia. However, there is some variation in border complexity, and column 8 shows that the baseline inverted-U relationship survives after dropping villages above the 90th percentile of border squiggliness.32 Note also that the symmetry in the inverted-U relationship goes against concerns about endogenous borders. In particular, one worries that villages with low Inner-Island ethnic shares merged with nonTransmigration villages for reasons correlated with tolerance for integration. However, we find similar results in places with low and high Inner-Island ethnic shares, suggesting that the positive effect of local diversity on national integration is not driven by the group configuration of low-diversity villages. Table 4 provides further evidence that sorting based on tolerance does not drive our results. For this exercise, we use the 1995 Supas data, which allows us to observe the timing of immigration and intrahousehold linguistic heritage. We first show that the inverted-U relationship is largely driven by initial 31 In both Susenas and Supas, the inverted U is even more stark as we expand the settlement catchment area to 20 or 30 km, at which point we still find a significant Inner-Island ethnic population due to the program (see Appendix Figure B.2). Regardless of the catchment area, the turning point is close to the 50 percent threshold. These spatial spillover results are also interesting in light of a concern that APPDT natives were positively selected into the Transmigration program and, being more tolerant, are a source of positive bias in estimating diversity impacts. If all of our effects were driven by the ex ante selection of tolerant APPDT natives, then expanding the settlement radius to 20–30 km should have flattened or turned the inverted U upside down. Instead we find the opposite, which is reassuring from an identification standpoint. 32 The fractal dimension of Transmigration villages is 0.014 on average compared to non-program villages, which have a statistically significantly higher average index of 0.015. For reference, Kenya, a country with straight borders imposed by colonizers (see Michalopoulos and Papaioannou, 2016), has an index of 0.013. The 90th percentile of villages in Table 3 still have very straight borders with a fractal dimension akin to Sudan, which Alesina et al. actually use as an example of straight borders. 19 program settlers. Column 1 reports a baseline IV specification analogous to the Susenas specification in column 2 of Table 2.33 Column 2 excludes Outer-Island natives that migrated to Transmigration areas from faraway locations outside the given district. Such long-distance migrants are more likely to have sorted endogenously than the typical APPDT settlers who happen to reside in nearby areas exposed to opportunities to relocate to Transmigration settlements. Column 3 further restricts to those individuals that arrived in the village during the initial years of settlement, thereby excluding post-program immigrants more likely to have sorted in ex post. Meanwhile, columns 4 and 5 of Appendix Table 4 rule out the role of pre-existing levels of national language affinity in driving our main results. Column 4 excludes households in which the head and spouse belong to different ethnolinguistic groups. This addresses the concern that intermarried households select-in to diverse communities and are also more likely to use the national language at home. Column 5 takes an even more demanding approach of excluding all households in which the head reports Indonesian as their mother tongue. These households account for around half of Indonesian use at home in the sample, though as discussed in Section 5.5 below, linguistic identity itself, particularly among the younger generation, is affected by diversity within one’s community. Across all robustness checks in Appendix Table 4, the baseline inverted-U shape and turning point around an equal mix of Inner and Outer Islanders remains unchanged. The result in column 5 is particularly encouraging as it suggests that the effects of diversity on national language use at home are not driven by those with inherited predisposition to national integration. It is precisely this catalyzing effect of unanticipated exposure to diversity on language use at home that can have intergenerational implications for nation building as discussed in Section 2.2. Together, the evidence from both Susenas and Supas point to a systematic positive effect of local diversity on nation building as implied by the primary use of Indonesian at home. 5.4 Mechanisms: Identifying Conditions That Facilitate Integration Overall, the positive effects of local diversity on national integration are consistent with contact theory and a large literature on cultural formation, which suggests that exposure to other groups can socialize cooperative preferences in the long run (see Pettigrew and Tropp, 2006, for a survey). Below, following our discussion in Section 2.1, we shed light on the conditions under which diversity leads to integration rather than segregation or social anomie. These conditions increase the relative benefit and reduce the relative costs of Indonesian use at home. The wide geographic scope of the program allows us to observe migrants in many different social and economic environments. This allows us to draw four lessons that can help inform the design of resettlement policies with respect to (i) the spatial configuration of communities, (ii) the local ethnic mix, (iii) interethnic economic competition, and (iv) the ethnopolitical balance. First, Table 5 shows how the spatial configuration of individuals mediates the effects of local diversity on integration. Column 1 examines residential segregation by augmenting the baseline quadratic IV specification from Table 2 with the isolation index for Inner- and Outer-Island groups within the village. We instrument the overall isolation index with that for households headed by the older generation of 33 Unlike Susenas, Supas records language questions for all household members. Hence, we include fixed effects for relationship to the household head as well as exhaustive age and years of schooling indicators. 20 initial settlers, which is more likely to be the outcome of the initial lottery assignment of plots (see Section 5.1) and hence plausibly exogenous.34 A one standard-deviation increase in isolation of ethnic groups across census blocks leads to roughly 6 p.p. lower use of the national language at home relative to the mean of 25 percent. Moreover, overall village-level diversity remains significant with the inverted U retaining its overall shape and location. We also find that geographical isolation can amplify the relationship between diversity and integration. Columns 2 and 3 show that the inverted-U shape is stronger in more remote places, perhaps because interactions with local neighbors are relatively more frequent. We proxy remoteness using the distance between Transmigration sites and the closest points on national and provincial highways. Unlike feeder roads to the Transmigration settlements, these highway routes were largely established by the Dutch well before the program (Rothenberg, 2013). The results are consistent with the general view that social capital tends to be stronger in more isolated communities with relatively stable membership (Munshi, 2014; Munshi and Rosenzweig, 2016). Second, we present evidence on the conditions under which diversity leads to national integration rather than local assimilation with the majority. Columns 4 and 5 split the sample by the ELF of the majority group and show that the inverted-U relationship is more pronounced in villages with a fragmented majority. For example, consider two Transmigration villages that have a majority of Inner Islanders. In Sungai Sitolang, the Inner Islanders are more fragmented with an equal mix of Javanese and Sundanese, compared to Rokan which is less fragmented since it is predominantly Javanese. Similarly, consider two villages with a majority of Outer Islanders, Singapura (high Outer-Island ELF) and Wonorejo (low Outer-Island ELF). Our results suggest national integration will be stronger in villages where the ELF of the majority group is greater (Sungai Sitolang and Singapura), consistent with stronger incentives to coordinate on a common national language when the local majority is fragmented (see Lazear, 1999). In a similar vein, columns 6 and 7 show that diversity has stronger effects on Indonesian use at home when the Inner–Outer linguistic distance is higher (as reflected in the linguistic similarity index used in Section 5.1).35 Column 6 demonstrates a strong inverted-U relationship in villages where transmigrants have languages that are less similar to the native Outer-Island group’s language, thereby increasing the cost of assimilation. Meanwhile, the flat shape in column 7 is in line with ethnographic evidence on the relative preference for regional languages rather than Indonesian when both are known among the given ethnic groups (Simpson, 2007a). Given that only one-quarter of the population is speaking Indonesian at home, we expect the stronger results to first appear in places where the Inner–Outer linguistic distance is greatest. Moreover, from the nation builder’s perspective, it is useful to understand the economic and social incentives that enhance Indonesian use at home. Together, the results in columns 4–7 highlight how fragmentation and linguistic distance can raise the cost of assimilation and encourage integration through the national language. Third, beyond the spatial and social environments above, we illustrate how the incentives created by the local economic environment may shape long-term integration outcomes. We argue in columns 8 and 9 that similarity in agricultural skills between Inner and Outer Islanders can lead to intergroup interactions that are more competitive rather than cooperative in nature. We capture these incentives using a 34 35 Treating the isolation index as predetermined and not instrumenting delivers very similar results. The linguistic distance between Javanese and prominent Outer-Island languages in Transmigration areas (e.g., Minangkabau, Batak, Toraja) can be significant, akin to the linguistic distance between German and French (Lewis et al., 2009). 21 measure of the similarity in agroclimatic characteristics between the migrants’ origins in Java/Bali and a given Transmigration settlement. This agroclimatic similarity index proxies for transmigrants’ familiarity with local growing conditions and is an important determinant of agricultural productivity (Bazzi et al., 2016).36 Column 8 shows that the inverted-U relationship is stronger in villages whose transmigrants have below median agroclimatic similarity. Interestingly, in villages with above median agroclimatic similarity, transmigrants have similar agricultural skills and potentially posed a greater competition to natives in the broader agricultural and economic marketplace. In fact, we see a U-shaped relationship in column 9, indicative of weaker integration in the most diverse communities. This reversal suggests that in settings with interethnic competition in the local economy, diversity may work against national integration. Fourth, Table 6 continues a similar line of investigation by examining conditions that may enhance the potential to view Inner-Island transmigrants as a political threat. Columns 1–4 of Table 6 show that the inverted-U relationship between Inner-Island ethnic share and national language use at home is stronger in Transmigration areas where the local Outer-Island ethnic group constitutes a more sizable political force. Columns 1 and 2 split the sample by the size of that group at the subdistrict level, and columns 3 and 4 do so at the district level. In both cases, the inverted U is more pronounced in villages where the local native group has above-median representation at the regional level, and is less likely to view transmigrants as a political threat. Meanwhile, columns 5 and 6 show that these findings do not extend to the province level where the sample split reveals similar inverted-U shapes for both low and high ethnic representation.37 Although speculative, this can be seen as a validation check insomuch as most political action and public resource contestation in Indonesia takes places at levels of administration below the province. 5.5 Marriage and Intergenerational Transmission of Identity The mechanisms we identify above suggest conditions where intergroup contact fosters cultural change by shaping identity across generations. Below, we provide direct evidence on intergroup relationships and identity choices among children. Our findings echo the patterns reported in Table 1, which showed that children who grow up in multiethnic parents or speaking Indonesian at home are more likely to be in intermarriages and are more likely to speak Indonesian at home when they form their own households. Figure 8 presents an inverted-U relationship between the Inner-Island ethnic share and the likelihood of intermarriage between young Inner and Outer Islanders. Since migrants could easily marry within their own ethnic group in villages with an equal mixes, the shape again highlights relatively stronger integration forces in diverse communities. We view these intermarriage patterns as additional evidence of new intergroup relationships. Despite Indonesia’s diversity, intermarriage is relatively uncommon with around 10 percent of individuals marrying outside their ethnic group and an even lower rate in rural areas. Such marriages may be a useful vehicle for nation building: Indonesian children in intermarried households exhibit greater tolerance and weaker ethnic attachment later in life (see Table 1). Next, we examine how diversity shapes national identity among youth by exploring the choice to 36 37 Importantly, this proxy, detailed further in Appendix D, is orthogonal to the instrument (see Appendix A.II). Note that even at this level, the median local ethnic group’s regional representation remains relatively high at around 20 percent compared to 30 and 40 percent at the district and subdistrict levels. 22 report Indonesian as a mother tongue. Using the 1995 Supas data, we restrict our analysis to the sample of all individuals reported as children of the household head and spouse. As discussed in Section 4.3, we view the decision to report Indonesian as one’s mother tongue as a leading indicator of national identity. Individual reporting of mother tongue exhibits considerable within-household variation and is not necessarily the primary language used at home. Among the 12,579 children in the regression sample, 17 percent report Indonesian as their primary language at home, and 16 percent as their mother tongue.38 We find a strong inverted-U relationship between the Inner-Island ethnic share and children’s attachment to the Indonesian language. This can be seen in Figure 8 and Table 2. Column 1 of Table 2 first confirms that the inverted-U relationship between Inner-Island ethnic share and Indonesian use at home holds for our sample of children as it did for the full population in Appendix Table 4. Column 2 then identifies a similar inverted-U relationship for Indonesian mother tongue. Interestingly, we find that the role of community-level diversity in shaping national identity among children goes above and beyond parental inputs to the socialization process. The patterns are robust to adding an indicator for whether parents are in an interethnic marriage (column 3) or an indicator for whether parents claim Indonesian as their own mother tongue (column 4), or both (column 5). Moreover, we show in Appendix Table A.3 that diversity has similarly large effects on children’s affinity with the Indonesian identity when restricting to a sample of children whose mother reports a primary language at home besides Indonesian. These results lend insight on the extent to which parental choices and local diversity may be substitutable in the identity formation process (Bisin and Verdier, 2000). Across columns, the results indicate that diversity outside the household still influences identity formation after accounting for the familial transmission channel. Overall, the nexus of results thus far are consistent with nation builders’ intentions to use Indonesian to promote a shared identity. While parental preferences and behavior play a crucial role in children’s attachment to the national identity, our findings here suggest that social conditions also matter. This provides further evidence on the scope for policy (that affects local diversity) to shape identity. To the extent that local diversity helps stimulate national language use at home, ethnic mixing can hasten the development of intergroup relationships and strengthen national identity across generations. By increasing the likelihood that parents socialize their children to use the national language, local diversity has the potential to foster nation building across generations. 6 Did the Transmigration Program Foster Nation Building? Despite the view among policymakers that the Transmigration program was an effective tool for nation building, popular accounts of local sentiments towards the program were not always positive. Even today, many of these accounts remain colored by particularly egregious cases of failed integration within the new settlements.39 Here, we shed new light on the long-term nation building impacts of the Trans38 However, the latter is not a strict subset of the former, with around 11 percent of those reporting Indonesian mother tongue not reporting it as the primary language at home, and 15 percent vice versa. Among those reporting Indonesian as their mother tongue, 23 percent have a co-resident mother who does not report Indonesian as her primary language at home. 39 For example, Pisani (2014) details a visit to a particularly unsuccessful Transmigration settlement in the conflict-ridden province of Aceh in the 1990s. She notes that “But even where transmigrants rubbed along well enough with their neighbors, 23 migration program. Investigating outcomes across all Transmigration settlements, we ultimately offer support for a more sanguine view of the program now emerging in the literature. In particular, we show that the program facilitated nation building as reflected in greater use of the national language at home and intermarriage in the Outer Islands. 6.1 Identifying Program Impacts We identify the impacts of the program using counterfactual villages that resulted from the sudden and large budget cuts in the mid-1980s. The dramatic fall of oil prices in January 1986 led to drastic reductions in the Transmigration budget. The number of resettled transmigrants fell sharply and as a result, many areas that originally planned to receive transmigrants never did (see Appendix C). Land clearing in these planned sites (or RDAs) was deferred indefinitely, and these unfinished sites were eventually settled by spontaneous migrants. Villages located in these planned but unsettled RDAs provide a counterfactual for what Transmigration villages would have looked like today in the absence of the program. We identify 907 of these counterfactual, almost-treated (control) villages by digitally tracing high-resolution planning maps of RDAs. We assume that if Transmigration settlements had not been part of the program, settlement of new villages would have taken place organically by the endogenous sorting of migrants. Without the almost-treated RDA villages, we would be comparing Transmigration villages with earlier settlements that tended to have better market access and natural advantages. Additionally, focusing on individuals in newly created villages allows us to shed light on how intergroup relationships develop in a community’s formative years, when multiple equilibria are possible and social norms are still in flux. Adopting a place-based evaluation strategy, we estimate program impacts based on the following equation for the average treatment on the treated (ATT): yj = ↵ + ✓ Transmigrationj + x0j + ⌫j , (2) where yj is an outcome for village j, Transmigrationj is a treatment indicator equal to one for Transmigration villages and zero for RDA villages, xj includes the predetermined control variables capturing natural advantages and used by planners in site selection, and ⌫j is an error term. The coefficient ✓ captures the ATT. We estimate ✓ using a Oaxaca-Blinder reweighting procedure adopted in recent evaluations of place-based policies (Kline and Moretti, 2014). This approach is akin to propensity-score reweighting but can be estimated in a single step (Kline, 2011), with standard errors clustered at the district level. To address the concern that the program targeted under-developed areas, Appendix B.I provides more balance checks and shows how restricting the counterfactual to villages in the almosttreated RDAs and reweighting the sample are important for causal identification. they carried on speaking their mother tongue, they cultivated crops they grew back home, they set up the gamelan gong orchestras that mirrored those of Java or Bali. It was more transplantation than transmigration, hardly a homogenizing force. . . . Transmigration was a rare failure in Suharto’s nation building efforts.” (pp. 36-7, emphasis added). Similar anecdotes and select case studies abound in the literature on Transmigration program and are part of broader concerns about “sons of the soil” conflict in Indonesia (see Fearon and Laitin, 2011). 24 6.2 Effects on Nation-Building Outcomes Table 8 presents the ATT results. Panel A shows that the Transmigration program increases adoption of Indonesian at home. Individuals in Transmigration areas are 25 p.p. more likely to report Indonesian as their primary language at home relative to the control area mean of 12 percent. We estimate this individual-level ATT for all people residing within 10 kilometers of treated or control village boundaries based on the 2006 Susenas sample. Each cell is a separate ATT estimate where the dependent variable is an indicator for whether the household head reports that the primary language used at home is Indonesian (column 1), native to Inner-Islands ethnicities (column 2), or native to Outer-Island ethnicities (column 3). Columns 2 and 3 show that the increased national language use is driven largely by lower use of native Outer-Island languages.40 In Appendix B.III, we show that these results are not explained by important individual- and villagelevel confounders. The ATT is robust to controlling for demographics and education, occupation, household expenditures per capita, and linguistic similarity between the local indigenous language and Malay (the root of Indonesian). Moreover, the effect size is plausible, roughly akin to the difference in national language use between individuals (i) in urban versus rural areas, or (ii) with middle school versus no education. Reassuringly, despite lower mean use of Indonesian at home in 1995, the Supas data reveal similar ATT effect sizes, even after accounting for some of the additional sample restrictions available with this data as noted in Section 5.3. In addition, the program leads to a higher intermarriage rate between Inner and Outer Islanders, with no effect on the overall marriage rate. Panel B of Table 8 presents estimates of equation (2) for the intermarriage rate among young cohorts.41 While we find no effects on the marriage rate (row 1), we identify a tripling of intermarriages between Inner- and Outer-Island ethnic groups in treated villages relative to a mean of 2.3 percent in control villages (row 2). The 5 p.p. effect size is large, comparable in magnitude to differences in intermarriage rates between primary- versus junior secondary-educated individuals in Indonesia’s ethnically-diverse and cosmopolitan capital, Jakarta. The ATT estimates point to significant changes in matching behavior within the marriage market.42 Furthermore, applying an adjustment factor for random matching, we still find a significant increase in intermarriage rates above and beyond the implied differences in the diversity of the marriage market across treated and control areas (row 3). In Appendix B.IV, we provide further background on this benchmarking exercise and 40 Indeed, restricting the ATT estimates to Outer Islanders (not shown), we find that those in Transmigration areas are 27 p.p. more likely to report Indonesian use at home relative to those in control areas (10 percent of whom report Indonesian). This suggests that native Outer Islanders are more likely to adopt the national language at home in Transmigration areas where they are more likely to come into contact with Inner-Island ethnic groups. Meanwhile, we do not find similar positive effects on Indonesian use when restricting to Inner Islanders. One potential explanation for this null effect could be that Inner Islanders in control areas tend to be significant minorities (see Appendix Table B.2) for whom adopting the majority, Outer Island group language (rather than Indonesian) offers another means of integration. The evidence presented in Section 5.2 is consistent with this interpretation as is the fact that Inner Islanders in control areas are significantly more likely on average to speak an Outer-Island language than those in treated areas. Of course, another explanation could be that Inner Islanders in both Transmigration and control areas are positively selected on tolerance, given that both were willing to migrate over long distances outside their ethnic homelands. 41 These age restrictions are as defined in Figure 8 for Transmigration villages. For control villages, we define the restrictions similarly but based on the median year of settlement for Transmigration villages within the same district or province. 42 The ATT for Inner–Outer intermarriages is similar to the ATT of 0.072 (0.011)*** for intermarriage between any ethnic groups, suggesting that most of the changes can be accounted for by the increased mixing between Inner- and Outer-Island ethnic groups. 25 also rule out additional concerns about selection. In our most demanding analysis, we utilize the full, individual-level Census data on over 1.2 million married individuals in Transmigration and control villages to identify treatment effects using finer comparisons and more granular controls. Together, these results suggest that integration is stronger in Transmigration settlements than in observably identical control areas. This is intuitive to the extent that endogenous sorting in control areas produces ethnic segregation and less intergroup exposure, thereby limiting the scope for diversity to foster cultural integration via national language use. While perhaps unsurprising through this lens, these patterns are nevertheless inconsistent with popular views of the program, which are overwhelmingly negative. That said, our results are consistent with a recent reappraisal of the program by Barter and Côté (2015) who argue that the state-sponsored Transmigration communities were not associated with the salient conflicts between Inner and Outer Islanders that erupted in the late 1990s. Their revisionist account complements our results and provides a counterpoint to claims that the program was a quintessential example of how state-sponsored migration can stoke “sons of the soil” conflict. The results in Section 5 suggest that the increase in local diversity is a key mechanism underlying these positive average program impacts on nation building. Taking this interpretation seriously, if the program only generated settlements in the tails of the distribution of Inner-Island ethnic shares, we would likely have inferred that there was a much weaker relationship between diversity and national language use at home. The mixed settlements in the middle of this distribution are much less likely to arise in the absence of the program. Yet, these are precisely the resettlement areas that drive much of the estimated ATT effects on national language use at home and intermarriage. 7 Conclusion We shed new light on how diversity contributes to an intergenerational process of nation building. We leverage a large-scale resettlement program involving two million voluntary migrants and 900 communities along a continuum of policy-induced local diversity. Importantly, land market imperfections limited ex-post sorting and tipping that would have otherwise neutralized the initial assignment, thereby allowing us to study how intergroup contact can shape identity and integration over time. Our findings illustrate how the relationship between diversity and integration is ambiguous, presenting scope for policy makers to manage intergroup relations amidst rising diversity. We find an invertedU relationship between the Inner-Island ethnic share and Indonesian use at home, intermarriages, as well as the national identity choices of children. This shape is consistent with stronger integration outcomes in places with an equal mix. Interestingly, we also find a U shape in places where migrants’ skills are potentially substitutes of the natives. We identify conditions that influence integration in diverse communities, including spatial segregation, linguistic distance, and perceived political competition. These findings contribute important lessons for the design of resettlement policies that should be investigated further in future work. Beyond Indonesia, the greater integration that we identify is important given that recent work documents potential economic benefits of diversity (e.g., Alesina et al., 2016; Ashraf and Galor, 2013) that may go unrealized if sociocultural concerns preclude efforts to foster greater diversity (e.g., Borjas, 2016). Indeed, our findings suggest that the link between ethnic diversity and conflict may be amenable to policy. 26 Our findings underscore the importance of a shared national identity to unite diverse groups and a common national language that can coordinate and connect multiple groups. Future work could examine the welfare consequences of instilling a national identity and weakening group attachments. From a policy perspective, the changes in marriage and language use that we observe have important implications for nation building given the social spillovers across generations. It is precisely the sort of intergenerational multipliers that we saw in the IFLS results in Section 4.3 that can help sustain high levels of local diversity over time. Although small, the mixed Transmigration communities may in turn matter for aggregate policy outcomes insomuch as local cultural change spills over onto the broader political environment as argued, for example, in the diffusion of democracy from local to national levels (Giuliano and Nunn, 2013). Because Transmigration settlements arose at a critical juncture of institutional development in these frontier areas of the country, it is possible that their impacts on subsequent social and cultural development in formerly frontier areas were quite sizable in the long-run.43 This potential for persistence is consistent with a growing body of economic research on culture and institutions (see Alesina and Giuliano, 2015) and should be further explored in future work. 43 The cultural geographer Zelinsky (1973) formalizes this possibility in his “doctrine of first effective settlement,” which asserts that “Whenever an empty territory undergoes settlement [. . .] the specific characteristics of the first group able to effect a viable, self-perpetuating society are of crucial significance for the later social and cultural geography of the area, no matter how tiny the initial band of settlers may have been.” 27