Economics Development Analysis Journal

Does Minimum Wage Reduces Gender Inequality in Indonesia?

Irawati Abdul, Yusrin S. Hasan, Fitri Hadi Yulia Akib — Fri, 16 Feb 2024 00:00:00 +0700

Gender inequality is a persistent challenge in many societies, reflecting disparities in access to resources, opportunities, and decision-making power between men and women. One policy area that has garnered significant attention in the quest for gender equality is the minimum wage. By setting a wage floor for all workers, minimum wage policies aim to enhance the economic well-being of low-income individuals, a group in which women are often overrepresented. However, the relationship between minimum wage policies and gender inequality is complex, and its impact remains a subject of extensive debate and research. This research investigates the impact of annual minimum wage policy changes in Indonesia on gender inequality using a dynamic panel data approach encompassing 34 provinces over eight years (2015-2022). Contrary to expectations, the results suggest that both in the short and long run, minimum wage policy increases gender inequality. This highlights the complexity of the relationship between minimum wage adjustments and gender dynamics, underscoring the need for nuanced policy design to ensure gender equality in labor market outcomes.

The Effect of Asean Financial Services Liberalisation on Economic Growth

Mufti Kandaga Abidin, Devanto Shasta Pratomo — Sat, 17 Feb 2024 00:00:00 +0700

In 1997, ASEAN agreed to liberalise the trade in financial services in the region marking its initial agreement with AFAS (ASEAN Framework Agreement in Services). In 2019, AFAS concluded the eighth round of the trade in financial services negotiations. Based on the agreement, this research aims to quantify the level of openness and investigate the connection between the openness level and and the economic growth ASEAN 5 countries. Using random effects panel data, the ASEAN financial services liberalisation positively and significantly affects economic growth. The results confirm that liberalisation is on track. Learning from the European Union’s experience in financial services integration, this research suggests that strengthening cross-border regulation and supervision is essential for moving forward after liberalisation.

Economic Simulation of Central Java: Indonesia’s Province-Based IRIO Analysis

Firmansyah Firmansyah, Siti Hilmiati Azyzia, Daffa Rizqi Prayudya — Sat, 17 Feb 2024 00:00:00 +0700

This study simulates increased sectoral investment in the economy of Central Java Province, Indonesia. Using output and household income indicators, several policy scenarios are applied to Indonesia's interregional input-output (IRIO) tables, including green economic scenarios. The aim of this research is to identify the most impactful policy on the economy of Central Java based on the results of investment policy simulations. Investment injections are conducted in production sectors within Central Java and in sectors outside the province. By assessing the direct, indirect and induced effects on economic sectors and households, cross-sectoral insights for regional development policies, the simulation results show that the Central Java economy experiences the best impact in terms of sectoral household output and income levels. In IRIO analysis, this impact is seen as a multiplier effect from sectors within and beyond Central Java. The findings imply that policies focused on local sector development will generate the highest income levels and largest output multiplier for Central Java given the existing economic conditions, while green economic policies do not have insignificant economic impacts compared to non-green policies. It is crucial to develop additional policy scenarios targeting both local and non-local industries to obtain more sensitive simulation results.

Youthful or Aged: Age Dependency and Inflation in ASEAN Countries

Sat, 17 Feb 2024 00:00:00 +0700

There has been a growing interest to understand inflation through demographic lens using a critical key indicator known as the dependency ratio. However, studies investigating this nexus in terms of ASEAN nations are limited, despite ASEAN undergoing a demographic transition. Therefore, this paper aims to investigate the impact of age-population ratio on the inflation rate across 8 ASEAN countries during 2000-2020. This research uses Feasible Generalized Least Squares (FGLS) estimation, as it is robust to groupwise heteroskedasticity, serial and cross-sectional correlations. The result reveals that population aging is deflationary. However, the elderly dependence successfully explains the price dynamic after controlled by monetary and macro variables. It means that aging matters for inflation along with the macro variables dynamic. In addition, the analysis also sheds light on the impacts of the young dependency, which does not significantly impact the inflation rate when macro variables are taken into account. This research also underlines the importance of considering demographic dynamics in the future monetary policy decisions.

Household Consumption and Electronic Money Transactions in Indonesia: VECM Approach

Widya Azilla, Besti Novianda — Mon, 19 Feb 2024 00:00:00 +0700

The high contribution of household consumption to GDP reflects the significant level of public consumption in Indonesia. This is evident from the annual increase in transactions through digital payment system, which facilitate easier for people to consume goods and services. Previous studies have offered various perspectives on the impact of electronic money transactions on household consumption, in both the short and long run. Therefore, this study aims to analyze the relationship between electronic money transactions and household consumption in Indonesia. By employing the Vector Error Correction Model (VECM) and examining data from 2009Q1 to 2022Q4, the study aims to provide insights into the dynamics of short-term and long-term relationships among electronic money transactions, household consumption expenditure, real income, and interest rates. Based on the results in the short term, it was found that electronic money and real income are positively related to household consumption expenditure in Indonesia. With the increase in electronic money transactions and people's income levels rising, households tend to spend more money, contributing to increased societal consumption. However, this positive relationship does not persist in the long term, suggesting that electronic money does not significantly impact household spending patterns over extended periods. Real income, on the other hand, continues to have a consistent effect in the long term. Furthermore, interest rates do not significantly influence consumption expenditure in either the short or long term. This implies that changes in interest rates do not notably affect consumer behaviour regarding spending habits in Indonesia.

Unveiling Human Development Index Mediation on Consumption Dynamics

Rosdiana Rosdiana, Muhammad Yasin Majoo — Mon, 15 Apr 2024 00:00:00 +0700

The research aims to explore the influence of household and government consumption expenditure on GRDP and its impact on HDI. Additionally, this study seeks to investigate the mediating role of HDI in the relationship between consumption expenditure and GRDP. The study utilizes data on Household Consumption Expenditures (HCE), Government Consumption Expenditures (GCE), Human Development Index (HDI), and Gross Regional Domestic Product (GRDP). The research population is all regions in North Maluku Province, totaling ten regions from 2013-2022. The sampling technique employs non-probability sampling with a census sampling method, resulting in a sample size equal to the population, which is 100 samples. The research adopts quantitative research methods, and the analysis techniques include SPSS and SmartPLS 4. The research findings indicate that Household Consumption Expenditures (HCE) significantly affect Gross Regional Domestic Product but do not impact the Human Development Index. Government Consumption Expenditures (GCE) do not significantly affect Gross Regional Domestic Product or the Human Development Index (HDI), and the Human Development Index (HDI) does not significantly influence Gross Regional Domestic Product (GRDP). Furthermore, HDI does not mediate the relationship between Household Consumption expenditure and Government Consumption expenditure on Gross Regional Domestic Product (GRDP).

Does Corruption, Unemployment, and Investment Affect Economic Growth in ASEAN-9

Muhammad Haldi, Muhammad Khoirul Fuddin — Sat, 17 Feb 2024 00:00:00 +0700

This research aims to analyze causality relationships and see the impact of different periods on the short- and long-term macroeconomic and non-economic variables in nine ASEAN countries, using the period from 2012 to 2022. This research uses the Granger causality approach and the Vector Error Correction Model to answer the problems in this research. The empirical results show no causal relationship between the variations in macroeconomic and non-economic variables used in this research. However, in the short term, we found that the interaction of macroeconomic and non-economic variables had a significant mutual influence. On the other hand, in the long term, corruption and unemployment have a significant and negative effect on economic growth, followed by foreign direct investment, which has a significant and positive effect on economic growth. More than that, we found an interesting thing: short- and long-term corruption is like a double-edged sword. In the short term, corruption is a driving force in the ASEAN economy, but in the long term, it causes something destructive for economic growth.

The Economic Impact of the Induction Stove Conversion Program in Indonesia

Raden Prima Hari Febrian, Uka Wikarya — Wed, 17 Apr 2024 00:00:00 +0700

The Indonesian government has been facing problems related to LPG subsidies for households, domestic supply shortages, and electricity oversupply for nine years. Increasing LPG stoves to induction stoves is an alternative policy to overcome these problems. The research was conducted by calculating the net benefits households, the government, and companies received due to the conversion of LPG stoves to induction cookers. Then, it becomes a stimulus for the national economy, calculated through input-output analysis. Calculations are made based on two program scenarios: the conversion of households receiving electricity and gas subsidies (scenario I) and soft selling schemes (scenario II) from 2023 – 2030. The analysis shows that households participating in the program can save energy expenditure between IDR 260,011 – IDR 2,163,452, energy subsidies of IDR 22.65 trillion, and imports of 10% - 18.90% per year. The impact of the national economy in scenario I through input-output analysis creates a GDP of IDR 71.01 trillion and a labour income of IDR 21.88 trillion. Meanwhile, scenario II creates a GDP of IDR 52.85 trillion and a labour income of IDR 19.76 trillion. The soft selling scheme minimizes government costs and significantly impacts the national economy so that it can be implemented as a national program.

Economic Growth in OIC Countries: The Role of Political Stability

Ahmad Nailul Hikam, Taosige Wau, Muhammad Ghafur Wibowo, Ibnu Muhdir — Thu, 18 Apr 2024 00:00:00 +0700

Economic growth is an important indicator to assess the economic condition of a country. Various factors greatly influence economic growth, and one of the important factors is the country's political stability. This study aims to analyze the factors affecting OIC countries' economic growth. These factors are foreign direct investment, trade openness, human capital, tourism, and political stability. This study uses panel data from 28 OIC countries during the 2006-2020-time span. This study estimates the model using the Generalized Method of Moment (GMM) analysis technique. The estimation results show that all independent variables have a significant positive effect on the economic growth of OIC countries except foreign direct investment, which produces a negative effect. The interaction between political stability and other variables also produces a significant effect. The interaction effect can strengthen the influence of human capital and tourism on economic growth. The resulting interaction effect between political stability with FDI and trade openness weakens its influence on economic growth. Thus, the high political stability needed to increase economic growth in OIC countries depends on its interaction with other factors in economic growth

The Impact of The Program Indonesia Pintar on School Participation

Muharlida Fazia Ulfa, Jahen F Rezki — Mon, 19 Feb 2024 00:00:00 +0700

In 2015, the government distributed Conditional Cash Transfer (CCT), called the Program Indonesia Pintar (PIP), to reduce education costs for poor households and increase children's school participation. This research aims to assess the impact of PIP on school participation according to recipients' education level and place of residence. The study utilizes National Socio-Economic Survey data from 514 districts/cities throughout Indonesia from 2013 to 2019. Observations are combined with the Propensity Score Matching (PSM) method to address selection bias. Additionally, the author employs the Instrumental Variable method to address indications of endogeneity among PIP recipients. The research findings indicate that PIP recipients exhibit characteristics typical of low-income families. Comparing recipient groups, it can be concluded that most PIP recipients are children living in small households with many household members and with parents of low educational attainment. Furthermore, the study reveals that PIP positively impacts school participation across all levels of education, with the most significant impact observed at the high school level. Moreover, PIP appears to have a greater impact on rural areas than urban ones.