Structural Change and Regional Economic Growth in Indonesia

Andriansyah, Andriansyah and Nurwanda, Asep and Rifai, Bakhtiar (2020): Structural Change and Regional Economic Growth in Indonesia.

Abstract

This paper investigates the relationship between structural change and regional economic growth in Indonesia. We utilize several measures of structural change, i.e. structural change index, norm absolute value index, shift-share method, and effective structural change index, for 30 provinces over the period 2005-2018. We show that the structural change has occurred across provinces, even though it is slowing, towards an agricultural-services transition. By employing dynamic panel data models, this study shows that structural change is a significant determinant of growth. However, structural change matters for growth only if there is an increase in productivity, not only a movement of labor across sectors. An improvement in productivity within sectors and a movement of labors to other sectors with better productivity lead to a better economic development.

• Item Type: MPRA Paper
• Language: English
• Keywords: Structural Change; Regional Growth; Indonesia; Productivity
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L16 - Industrial Organization and Macroeconomics: Industrial Structure and Structural Change ; Industrial Price Indices; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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