Determinants of Unemployment in the Large and Medium Industrial Sector in Indonesia
Keywords:
Keywords, Unemployment, Labor Demand Theory, Fixed Effect ModelAbstract
As a country with the second-highest unemployment rate, Indonesian policymakers should worry about this condition. Based on the macroeconomic perspective, unemployment is affected by the firms' labour demand. It highlights that the firm's profit or loss highly determines the labour force demand. Using the Fixed Effect Model, this study results show that the labour force significantly affects industrial output, and the changes of industrial output highly increase the labour demand in the market. However, foreign and domestic capital neither significantly reduce unemployment rate in Indonesia nor stimulate the large and medium industries to absorb labour in the market. The Government should utilize foreign and domestic capital efficiently as possible to reduce unemployment rate.References
Abouelfarag, H. A., & Qutb, R. (2020). Does government expenditure reduce unemployment in Egypt?. Journal of Economic and Administrative Sciences. DOI 10.1108/JEAS-01-2020-0011
Chen, B-L., Hsu, M., & Lai, C-F. (2016). Relation between growth and unemployment in a model with labor-force participation and adverse labor institutions. Journal of Macroeconomics 50 (2016) 273–292. http://dx.doi.org/10.1016/j.jmacro.2016.10.004
Chenic, A. S., & Marginean, S. (2013). Effects of Raising Minimum Wage: Theory, Evidence and Future Challenges. Procedia Economics and Finance 6 (2013) 96 – 102. doi: 10.1016/S2212-5671(13)00119-6
Comanor, W. S., Schweitzer, S. O., Riddle, J. M., & Schoenberg, F. (2018). Value based pricing of pharmaceuticals in the US and UK: Does centralized cost effectiveness analysis matter? Review of Industrial Organization, 52(4), 589–602. https://doi.org/10.1007/s11151-018-9616-1
Dinga, M., & Munich, D. (2010). The impact of territorially concentrated FDI on local labor markets: Evidence from the Czech Republic. Labour Economics 17 (2010) 354-367. doi:10.1016/j.labeco.2009.06.003
Elder-Vass, D. (2019). No price without value: towards a theory of value and price. Cambridge Journal of Economics. doi:10.1093/cje/bez040
Farsio, F., & Quade, S. (2003). An Empirical Analysis of the Relationship Between GDP and Unemployment. Humanomics, Vol. 19 Iss 3 pp. 1 – 6. http://dx.doi.org/10.1108/eb018884
Fields, G. S., (1994). The Unemployment Effects of Minimum Wages. International Journal of Manpower, Vol. 15 Iss 2/3 pp. 74 – 81. http://dx.doi.org/10.1108/01437729410059323
Herbertsson, T. T., & Zoega, G. (2002). The Modigliani ‘puzzle’. Economics Letters 76 (2002) 437–442. PII: S0165-1765(02)00089-7
Kala, G., Masbar, R., & Syahnur, S. (2018) The Effect of Exchange Rate, Inflation, Capital, and Labor Force on Economic Growth In Indonesia. Jurnal Ekonomi dan Kebijakan Publik Indonesia Volume 5 Nomor 1, Mei 2018. E-ISSN. 2549-8355
Quer, D., Claver, E., & Rienda, L. (2012). Political risk, cultural distance, and outward foreign direct investment: empirical evidence from large Chinese firms. Asia Pacific Journal of Management, Vol. 29 No. 4, pp. 1089-1104. DOI: 10.1007/s10490-011-9247-7
Republik Indonesia. 2007. Undang – Undang Nomor 25 Tahun 2007 Tentang Penanaman Modal
Schubert, S. F., & Turnovsky, S. J. (2017). Growth and Unemployment: Short-run and Long-run Tradeoffs. Journal of Economic Dynamics & Control (2017), doi:10.1016/j.jedc.2017.11.003
Siregar, T. H. (2019). Impacts of minimum wages on employment and unemployment in Indonesia. Journal Of The Asia Pacific Economy. https://doi.org/10.1080/13547860.2019.1625585
Solow, R. M. (1956). A Contribution to The Theory of Economic Growth. The Quarterly Journal of Economics, Vol. 70, No. 1 (Feb., 1956), pp. 65-94. The MIT Press. http://www.jstor.org/stable/1884513
Statistics Indonesia. (2021). Indonesia Labour Market, 2008-2019. Jakarta: Central Bureau of Statistic (CBS) of Indonesia.
Syahnur, S., Marwan., Munzir, S., Hizir., & Dawood, T. C. (2019). Investigating wage bargaining power, wage inequality and industrial structure in Indonesia. Economic Journal of Emerging Markets, 11(2) 2019, 161-172. DOI: 10.20885/ejem.vol11.iss2.art4
Wang, J., & Gunderson, M. (2012). Minimum wage effects on employment and wages: dif-in-dif estimates from eastern China. International Journal of Manpower Vol. 33 No. 8, 2012 pp. 860-876. DOI 10.1108/01437721211280353.
Yusuf, H. A., Shittu, W. O., Akanbi, S. B., Umar, H. M. B., & Abdulrahman, I. A. (2020). The role of foreign direct investment, financial development, democracy, and political (in) stability on economic growth in West Africa. International Trade, Politics and Development Vol. 4 No. 1, 2020 pp. 27-46. DOI 10.1108/ITPD-01-2020-0002
Published
Issue
Section
Authors who publish with this journal agree to the following terms:
With the receipt of the article by Editorial Board of the International Journal of Global Operations Research (IJGOR) and it was decided to be published, then the copyright regarding the article will be diverted to IJGOR
International Journal of Global Operations Research (IJGOR) hold the copyright regarding all the published articles and has the right to multiply and distribute the article under Creative Commons Atribusi 4.0 Internasional.
Copyright tranfer statement the author to the journal is done through filling out the copyright transfer form by author. The form can be downloaded HERE.
