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Employment Function for Indonesia: An Econometric Analysis at the Sectoral Level

Author

Listed:
  • Mohammad Zulfan Tadjoeddin*
  • Anis Chowdhury

    (University of Western Sydney, Australia
    University of Western Sydney, Australia
    UN-Department of Economic & Social Affairs, New York)

Abstract

The Indonesian government has pinned its hope for reducing unemployment on higher economic growth and increased labor market flexibility, such as lowering minimum wages. The estimated sectoral employment functions reveal that output growth rather than real wages is the major determinant of employment. Additionally, the real wage elasticity of employment in the manufacturing sector is very low. That is, a large cut in real wage will have marginal gains in employment, causing a decline in labor income. Therefore, the strategy of lowering real wage is likely to increase the incidence of the working poor as well as the incidence of vulnerability.

Suggested Citation

  • Mohammad Zulfan Tadjoeddin* & Anis Chowdhury, 2012. "Employment Function for Indonesia: An Econometric Analysis at the Sectoral Level," Journal of Developing Areas, Tennessee State University, College of Business, vol. 46(1), pages 265-285, January-J.
    • Handle: RePEc:jda:journl:vol.46:year:2012:issue1:pp:265-285
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    Citations

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    Cited by:

    1. Mohammad Zulfan Tadjoeddin & Ilmiawan Auwalin & Anis Chowdhury, 2016. "Revitalizing Indonesia’s manufacturing: the productivity conundrum," Departmental Working Papers 2016-20, The Australian National University, Arndt-Corden Department of Economics.
    2. EL HAMADI Youssef & ABDOUNI Abdeljabbar & BOUAOUZ Karima, 2017. "The Sectoral Employment Intensity Of Growth In Morocco: A Pooled Mean Group Approach," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 17(2), pages 87-98.
    3. Mohammad Zulfan Tadjoeddin, 2016. "Earnings, productivity and inequality in Indonesia," The Economic and Labour Relations Review, , vol. 27(2), pages 248-271, June.

    More about this item

    Keywords

    Employment elasticity; real wage; panel data regression;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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