STRUCTURAL CHANGE, ECONOMIC GROWTH, AND EMPLOYMENT OPPORTUNITIES IN INDONESIA; A Simultaneous Approach

1Didi Tarmidi, Djufri Rays Pattilouw, Mohd Haizam Mohd Saudi

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Abstract:

The purpose of this study is toanalyze the relationship between structural change, economic growth and employment in Indonesia.The analytical method use dissimultaneous regression model consisting of 3 (three) equations where economic growth, structural change and employment is treated as endogenous variables, and include three (3) exogenous variables namely investment, wage and education. From the identification test is known thatequation of employment is exactly Identified then estimated using indirect leastsquare (ILS) method, while 2 other sareover-Identified equation then estimated using a two stage leastsquare (TSLS) method. The results showed that : 1) Economic growth is positively and significantly influenced by employment and investment, 2) Employment are positively and significantly influenced by economic growth and structural change, while the wage rate has a negative effect; 3) structural change positively and significantly influenced by economic growth and the advancement of education. Important recommendations of these findings are : 1) expansion of employment should be more focused on efforts to encourage productive investments with labor-intensive technologies, 2) increased investments must be accompanied by improvement of the level of educationand improving the quality of labor, 3) the process of structural change must be maintained in the direction of employment transformation through the development of labor-intensive industrial and service sectors.

Keywords:

economicgrowth, structuralchange, employment

Paper Details
Month2
Year2020
Volume24
IssueIssue 2
Pages7861-7871