IDEAS home Printed from https://ideas.repec.org/p/pas/papers/2018-11.html
   My bibliography  Save this paper

Is structural transformation-led economic growth immiserising or inclusive? The case of Indonesia

Author

Listed:
  • Kyunghoon Kim
  • Andy Sumner
  • Arief Anshory Yusuf

Abstract

This paper examines the relationship between structural transformation and the inclusivity of growth using the case of Indonesia. In the past two decades, Indonesia has become a service-centred economy; manufacturing sector’s capacity to generate employment and lead productivity growth has deteriorated compared to during the two decades prior to the Asian financial crisis. A multidimensional analysis of Indonesia’s structural transformation shows that productivity growth since the crisis has been higher than the long-term average, driven both by within-sector productivity gains and labour movement to higher productivity sectors. Also, Indonesia has not experienced a rising level of informality that is increasingly a concern for other developing countries going through service-led structural change. We argue thus that structural transformation has offered sustainable opportunities to the Indonesian workers in general. However, Indonesia’s economic growth is unlikely to as dynamic as during the high growth period (1986–1996) if the service sector continues to lead structural transformation. Compared to the industrial subsector, the service subsector with large employment absorptive capacity, has low productivity. Indonesia face challenges of recovering economic dynamism as well as managing the consequences of structural transformation.

Suggested Citation

  • Kyunghoon Kim & Andy Sumner & Arief Anshory Yusuf, 2018. "Is structural transformation-led economic growth immiserising or inclusive? The case of Indonesia," Departmental Working Papers 2018-11, The Australian National University, Arndt-Corden Department of Economics.
  • Handle: RePEc:pas:papers:2018-11
    as

    Download full text from publisher

    File URL: https://acde.crawford.anu.edu.au/sites/default/files/publication/crawford01_cap_anu_edu_au/2018-05/final_2018_-11.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Aswicahyono, Haryo & Narjok, Dionisius, 2011. "Indonesian Industrialization," WIDER Working Paper Series 053, World Institute for Development Economic Research (UNU-WIDER).
    2. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    3. Szirmai, Adam & Naude, Wim & Alcorta, Ludovico (ed.), 2013. "Pathways to Industrialization in the Twenty-First Century: New Challenges and Emerging Paradigms," OUP Catalogue, Oxford University Press, number 9780199667857, Decembrie.
    4. Ximena Del Carpio & Ha Nguyen & Laura Pabon & Liang Wang, 2015. "Do minimum wages affect employment? Evidence from the manufacturing sector in Indonesia," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-30, December.
    5. Tim J. Coelli & D. S. Prasada Rao, 2005. "Total factor productivity growth in agriculture: a Malmquist index analysis of 93 countries, 1980–2000," Agricultural Economics, International Association of Agricultural Economists, vol. 32(s1), pages 115-134, January.
    6. Amrit Amirapu and Arvind Subramanian, 2015. "Manufacturing or Services? An Indian Illustration of a Development Dilemma - Working Paper 409," Working Papers 409, Center for Global Development.
    7. H.H. Aswicahyono & Kelly Bird & Hal Hill, 1996. "What happens to industrial structure when countries liberalise? Indonesia since the mid‐1980s," Journal of Development Studies, Taylor & Francis Journals, vol. 32(3), pages 340-363.
    8. Haryo Aswicahyono & Hal Hill & Dionisius Narjoko, 2010. "Industrialisation after a Deep Economic Crisis: Indonesia," Journal of Development Studies, Taylor & Francis Journals, vol. 46(6), pages 1084-1108.
    9. Amrit Amirapu & Arvind Subramanian, 2015. "Manufacturing or Services? An Indian Illustration of a Development Dilemma," Working Papers id:7521, eSocialSciences.
    10. Haryo Aswicahyono, 2000. "How Not to Industrialise? Indonesia's Automotive Industry," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 36(1), pages 209-241.
    11. Daron Acemoglu & James A. Robinson, 2002. "The Political Economy of the Kuznets Curve," Review of Development Economics, Wiley Blackwell, vol. 6(2), pages 183-203, June.
    12. Aswicahyono, Haryo & Brooks, Douglas H. & Manning, Chris, 2011. "Exports and Employment in Indonesia: The Decline in Labor-Intensive Manufacturing and the Rise of Services," ADB Economics Working Paper Series 279, Asian Development Bank.
    13. Chang, Jae-Hee. & Huynh, Phu., 2016. "ASEAN in transformation the future of jobs at risk of automation," ILO Working Papers 994906463402676, International Labour Organization.
    14. George Fane, 1999. "Indonesian Economic Policies and Performance, 1960–98," The World Economy, Wiley Blackwell, vol. 22(5), pages 651-668, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kyunghoon Kim & Arriya Mungsunti & Andy Sumner & Arief Anshory Yusuf, 2020. "Structural transformation and inclusive growth: Kuznets' 'developer's dilemma' in Indonesia," WIDER Working Paper Series wp-2020-31, World Institute for Development Economic Research (UNU-WIDER).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gregor Semieniuk & Mariana Mazzucato, 2018. "Financing Green Growth," Working Papers 210, Department of Economics, SOAS University of London, UK.
    2. Richard Grabowski, 2017. "Limited access states and elections: an unexpected economic consequence," Evolutionary and Institutional Economics Review, Springer, vol. 14(1), pages 61-78, June.
    3. Gregor Semieniuk, 2018. "Energy in Economic Growth: Is Faster Growth Greener?," Working Papers 208, Department of Economics, SOAS University of London, UK.
    4. Kyunghoon Kim & Arriya Mungsunti & Andy Sumner & Arief Anshory Yusuf, 2020. "Structural transformation and inclusive growth: Kuznets' 'developer's dilemma' in Indonesia," WIDER Working Paper Series wp-2020-31, World Institute for Development Economic Research (UNU-WIDER).
    5. Niftiyev, Ibrahim, 2020. "The De-industrialization Process In Azerbaijan: Dutch Disease Syndrome Revisited," EconStor Conference Papers 227485, ZBW - Leibniz Information Centre for Economics.
    6. Amrit Amirapu, 2021. "Justice Delayed Is Growth Denied: The Effect of Slow Courts on Relationship-Specific Industries in India," Economic Development and Cultural Change, University of Chicago Press, vol. 70(1), pages 415-451.
    7. Ajit K. Ghose, 2021. "Structural Change and Development in India," Indian Journal of Human Development, , vol. 15(1), pages 7-29, April.
    8. Kumar, Rishabh & Balasubramanian, Sriram & Loungani, Prakash, 2022. "Inequality and locational determinants of the distribution of living standards in India," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 59-69.
    9. Dani Rodrik, 2016. "Premature deindustrialization," Journal of Economic Growth, Springer, vol. 21(1), pages 1-33, March.
    10. Sjöholm, Fredrik & Lipsey, Robert E. & Sun, Jing, 2010. "Foreign Ownership and Employment Growth in Indonesian Manufacturing," Working Paper Series 831, Research Institute of Industrial Economics.
    11. Mitsuhiko Kataoka, 2015. "Interprovincial differences in the endowment and utilization in labour force by educational attainment in Indonesia's post-crisis economy," ERSA conference papers ersa15p878, European Regional Science Association.
    12. Grabowski, Richard & Self, Sharmistha, 2017. "The development of manufacturing: Unintended consequence," Journal of Asian Economics, Elsevier, vol. 52(C), pages 1-11.
    13. Martin Labaj & Stracova Erika, 2019. "Drivers of Deindustrialisation: Sub-system Analysis of Internationally Fragmented Production Structures," Department of Economic Policy Working Paper Series 018, Department of Economic Policy, Faculty of National Economy, University of Economics in Bratislava.
    14. Michael Shashoua & Sudip Ranjan Basu, 2015. "Polarizing World: GDP, Development and Beyond," MPDD Working Paper Series WP/15/13, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    15. 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.
    16. Cinar Baymul & Kunal Sen, 2020. "Was Kuznets Right? New Evidence on the Relationship between Structural Transformation and Inequality," Journal of Development Studies, Taylor & Francis Journals, vol. 56(9), pages 1643-1662, July.
    17. Melia, Elvis, 2020. "African jobs in the digital era: Export options with a focus on online labour," IDOS Discussion Papers 3/2020, German Institute of Development and Sustainability (IDOS).
    18. Shoumitro Chatterjee & Arvind Subramanian, 2023. "India’s inward (re)turn: is it warranted? Will it work?," Indian Economic Review, Springer, vol. 58(1), pages 35-59, July.
    19. Roby Setiadi & Kardison Lumban Batu & Harry Soesanto, 2017. "Does an Environmental Marketing Strategy Influence Marketing and Financial Performance? A Study of Indonesian Exporting Firms," Tržište/Market, Faculty of Economics and Business, University of Zagreb, vol. 29(2), pages 177-192.
    20. Sher Singh Verick, 2017. "The puzzles and contradictions of the Indian labour market: What will the future of work look like?," ASARC Working Papers 2017-02, The Australian National University, Australia South Asia Research Centre.

    More about this item

    Keywords

    Indonesia; structural change; inclusive growth; productivity; employment;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pas:papers:2018-11. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Prema-chandra Athukorala (email available below). General contact details of provider: https://edirc.repec.org/data/asanuau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.