Do Household Consumption and Literacy Rate Impact the Fluctuation of the Unemployment in Indonesia?
DOI:
https://doi.org/10.12928/jampe.v3i1.9016Keywords:
Household Consumption, Labour Force, Macroeconomics Variables, Ordinary Least Square, UnemploymentAbstract
This paper aims to investigate the linkage and explore what has determined the unemployment rate in Indonesia from 2000 to 2021 which include literacy rate, school enrolment, labour force participation and household and non-profit institutions serving households (NPISHs) as the main explanatory variables. To control factors of unemployment and avoid spurious or misleading results, other than FDI, we include other macroeconomics variables such inflation, trade and interest rate. This study deploys timeseries regression and Ordinary Least Square (OLS) as the regression technique to estimate the coefficients of the linear function that best fits the data. To assess the model's assumptions and diagnose any potential issues that may affect the model's reliability and validity, the author applied heteroscedasticity, normality, multicollinearity, and autocorrelation test. All data are attained from World Development Index (WDI). Overall, HNC is the only determinant significantly increase level of Indonesia unemployment. While the increase of FDI may exacerbate Indonesia’s unemployment rate, LFP plays significant role in reducing the unemployment rate in Indonesia. The contribution of this paper lies in providing a nuanced understanding of the specific determinants of unemployment, with a particular emphasis on the significant impact of NPISHs. Based on the findings, policymakers should think about making investments in NPISHs to spur growth in the economy while generating job opportunities.
References
Alfaro, L., & Chauvin, J. (2020). Foreign direct investment, finance, and economic development. Encyclopedia of International Economics and Global Trade, 1, 231–258. http://dx.doi.org/10.1142/9789811200595_0011
Asrol, A., & Ahmad, H. (2018). Analysis of factors that affect poverty in Indonesia. Revista Espacios, 39(45).
Aykut, D., Sanghi, A., & Kosmidou, G. (2017). What to do when foreign direct investment is not direct or foreign: FDI round tripping. World Bank Policy Research Working Paper, 8046. http://dx.doi.org/10.1596/1813-9450-8046
Az Zakiyyah, N.A. (2023). Infrastructure and Poverty: State Budget Effect Analysis with Panel Model. Journal of Asset Management and Public Economics 2(2), 82-94. https://doi.org/10.12928/jampe.v2i2.7943
Bank, W. (2022). World Development Indicators. World Development Indicators.
Stepanok, I. (2023). FDI and unemployment, a growth perspective. Review of International Economics, 31(2), 761–783. https://doi.org/10.1111/roie.12643
Blanchard, O. (2019). Public debt and low interest rates. American Economic Review, 109(4), 1197–1229. http://dx.doi.org/10.1257/aer.109.4.1197
Coibion, O., Gorodnichenko, Y., & Weber, M. (2020). Labor markets during the COVID-19 crisis: A preliminary view. National Bureau of economic research. http://dx.doi.org/10.3386/w27017
Dauth, W., Findeisen, S., & Suedekum, J. (2017). Trade and manufacturing jobs in Germany. American Economic Review, 107(5), 337–342. http://dx.doi.org/10.1257/aer.p20171025
Dechezleprêtre, A., & Sato, M. (2017). The impacts of environmental regulations on competitiveness. Review of Environmental Economics and Policy. http://dx.doi.org/10.1093/reep/rex013
Dencker, J. C., Bacq, S., Gruber, M., & Haas, M. (2021). Reconceptualizing necessity entrepreneurship: A contextualized framework of entrepreneurial processes under the condition of basic needs. Academy of Management Review, 46(1), 60–79. http://dx.doi.org/10.5465/amr.2017.0471
Dwyer, L. (2022). Tourism economics and policy. In Encyclopedia of Tourism Management and Marketing (pp. 421–424). Edward Elgar Publishing. http://dx.doi.org/10.4337/9781800377486.tourism.economics
Erlando, A., Riyanto, F. D., & Masakazu, S. (2020). Financial inclusion, economic growth, and poverty alleviation: evidence from eastern Indonesia. Heliyon, 6(10), e05235. http://dx.doi.org/10.1016/j.heliyon.2020.e05235
Feenstra, R. C., Ma, H., & Xu, Y. (2019). US exports and employment. Journal of International Economics, 120, 46–58. http://dx.doi.org/10.1016/j.jinteco.2019.05.002
Feng, S., Hu, Y., & Moffitt, R. (2017). Long run trends in unemployment and labor force participation in urban China. Journal of Comparative Economics, 45(2), 304–324. http://dx.doi.org/10.1016/j.jce.2017.02.004
Furth, S. (2017). Measuring inflation accurately. Backgrounder, 3213.
Gallant, J., Kroft, K., Lange, F., & Notowidigdo, M. J. (2020). Temporary unemployment and labor market dynamics during the COVID-19 recession. National Bureau of Economic Research. http://dx.doi.org/10.3386/w27924
Gopinath, G. (2020). The great lockdown: Worst economic downturn since the great depression. IMF Blog, 14, 2020.
Grahovac, D., & Softić, S. (2017). Impact of the FDI on Unemployment rate in countries of West Balkan. Review of Innovation and Competitiveness: A Journal of Economic and Social Research, 3(2), 65–82. http://dx.doi.org/10.32728/ric.2017.32/4
Idrus, S., & Rosida, L. (2020). Poverty In Indonesia: Critical Review. Archives of Business Review, 8(6). http://dx.doi.org/10.14738/abr.86.8326
Johnny, N., Timipere, E. T., Krokeme, O., & Markjackson, D. (2018). Impact of foreign direct investment on unemployment rate in Nigeria (1980-2015). International Journal of Academic Research in Business and Social Sciences, 8(3), 57–69. http://dx.doi.org/10.6007/ijarbss/v8-i3/3905
Karakurum-Ozdemir, K., Kokkizil, M., & Uysal, G. (2019). Financial literacy in developing countries. Social Indicators Research, 143, 325–353. http://dx.doi.org/10.1007/s11205-018-1952-x
Khanh Nguyen, H. T., Nang Thu, T. T., Lebailly, P., & Azadi, H. (2019). Economic challenges of the export-oriented aquaculture sector in Vietnam. Journal of Applied Aquaculture, 31(4), 367–383. http://dx.doi.org/10.1080/10454438.2019.1576568
Kwaku Amoah, S. (2018). The Role of Small and Medium Enterprises (SMEs) to Employment in Ghana. International Journal of Business and Economics Research, 7(5), 151. https://doi.org/10.11648/j.ijber.20180705.14
Ma, J., Hou, Y., Yang, W., & Tian, Y. (2020). A time-based pricing game in a competitive vehicle market regarding the intervention of carbon emission reduction. Energy Policy, 142(September 2019), 111440. https://doi.org/10.1016/j.enpol.2020.111440
Maneejuk, P., & Yamaka, W. (2021). The impact of higher education on economic growth in asean-5 countries. Sustainability (Switzerland), 13(2), 1–28. https://doi.org/10.3390/su13020520
Martin, A., Markhvida, M., Hallegatte, S., & Walsh, B. (2020). Socio-economic impacts of COVID-19 on household consumption and poverty. Economics of Disasters and Climate Change, 4(3), 453–479. http://dx.doi.org/10.1007/s41885-020-00070-3
Mitch, D. (2018). The role of education and skill in the British industrial revolution. In The British Industrial Revolution, 241–279. Routledge. http://dx.doi.org/10.4324/9780429494567-5
Pavcnik, N. (2017). The impact of trade on inequality in developing countries. National Bureau of Economic Research.
Saini, N., & Singhania, M. (2018). Determinants of FDI in developed and developing countries: A quantitative analysis using GMM. Journal of Economic Studies. http://dx.doi.org/10.1108/jes-07-2016-0138
Salmi, J. (2017). The tertiary education imperative: Knowledge, skills and values for development. Springer.
Schinckus, L., Dangoisse, F., Van den Broucke, S., & Mikolajczak, M. (2018). When knowing is not enough: Emotional distress and depression reduce the positive effects of health literacy on diabetes self-management. Patient Education and Counseling, 101(2), 324–330. http://dx.doi.org/10.1016/j.pec.2017.08.006
Selim, M., & Hassan, M. K. (2019). Interest-free monetary policy and its impact on inflation and unemployment rates. ISRA International Journal of Islamic Finance, 11(1), 46–61. http://dx.doi.org/10.1108/ijif-06-2018-0065
Singh, R. (2018). Impact of GDP and inflation on unemployment rate:" A study of Indian Economy in 2011–2018”. International Journal of Management, IT and Engineering, 8(3), 329–340.
Stepanok, I. (2023). FDI and unemployment, a growth perspective. Review of International Economics, 31(2), 761–783. https://doi.org/10.1111/roie.12643
Susilawati, S., Falefi, R., & Purwoko, A. (2020). Impact of COVID-19’s Pandemic on the Economy of Indonesia. Budapest International Research and Critics Institute-Journal (BIRCI-Journal), 3(2), 1147–1156. http://dx.doi.org/10.33258/birci.v3i2.954
van Empel, G., Mulyanto, J., & Wiratama, B. S. (2020). Undertesting of COVID-19 in Indonesia: what has gone wrong? Journal of Global Health, 10(2). http://dx.doi.org/10.7189/jogh.10.020306
Vancea, M., & Utzet, M. (2017). How unemployment and precarious employment affect the health of young people: A scoping study on social determinants. Scandinavian Journal of Public Health, 45(1), 73–84. http://dx.doi.org/10.1177/1403494816679555
Yip, C. M. (2018). On the labor market consequences of environmental taxes. Journal of Environmental Economics and Management, 89, 136–152. http://dx.doi.org/10.1016/j.jeem.2018.03.004
Yuniarti, D., & Purwaningsih, Y. (2017). Household Food Security and Vulnerability: the Sustainable Livelihood Framework. JEJAK: Jurnal Ekonomi dan Kebijakan, 10(2), 223-241. doi:https://doi.org/10.15294/jejak.v10i2.11290
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Muhammad Ismail Sunni, M. Indre Wanof, Angga Kusuma Wijaya
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
