The effect of knowledge spillovers and human capital through technological intensity on employment growth in Indonesia
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The effect of knowledge spillovers and human capital through technological intensity on employment growth in Indonesia Noor Fauziah Isnaeni1 · Khoirunurrofik Khoirunurrofik2 Received: 31 December 2019 / Accepted: 23 September 2020 © The Japan Section of the Regional Science Association International 2020
Abstract This study estimates the effects of externalities of agglomeration in the form of knowledge spillovers (Marshall–Arrow–Romer/job specialization, Jacobs/diversity, and Porter/competition) and of externalities obtained from human capital on employment growth based on the technological intensity in an industry. We employed the data of International Standard Industrial Classification of all Economic Activities two-digit numerical codes for manufacturing industries at the level of districts and cities in Indonesia in 2010 and 2015 and ran the estimation model using ordinary least squares. The results show that while employment growth is constrained by specialization, it is complied by diversity though it is statistically insignificant across technological intensity in the industry. Competition has negative effects on both low- and medium–low-technology industries; however, it has positive effects on high-technology industries. Additionally, human capital negatively affects low-technology industries, while it positively affects medium–low and hightechnology industries. Keywords Knowledge spillovers · Employment growth · Technology · Human capital · Indonesia JEL classification O18 · O33 · R11
* Khoirunurrofik Khoirunurrofik [email protected] Noor Fauziah Isnaeni [email protected] 1
Graduate Programme in Economics, Faculty of Economics and Business, Universitas Indonesia, Beji, Depok, Jawa Barat 16424, Indonesia
2
Department of Economics, Faculty of Economics and Business, Institute for Economic and Social Research (LPEM), Universitas Indonesia, Salemba Raya 4, Jakarta 10430, Indonesia
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Vol.:(0123456789)
Asia-Pacific Journal of Regional Science
1 Introduction The manufacturing industry has been a major driver of Indonesia’s economy contributing one-third of its GDP with an annual growth rate of 12% since 1991. However, these accomplishments declined when successive economic, financial, and political crises hit Indonesia during 1997–1998. After the crises, manufacturing sector’s performance did not fully recover and was expected to be slower than in other countries (World Bank 2012). The revitalization of the sector is necessary considering the crucial role it plays in providing better jobs in terms of both quality and quantity. However, despite its great potential, the data from Indonesia Statistics (2017) showed that employment growth in the manufacturing sector (2–5%) was far below the GDP growth (5–7%) and the output growth from manufacturing sector (5–20%)1. Therefore, it can be argued that improving job opportunities/labor absorption becomes paramount in the process of revitalizing the manufacturing sector, considering the size of Indonesia’s population. One of the factors affe
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