LABOUR FORCE EFFECTS TO CURRENT ACCOUNT MOVEMENT OF ASEAN + 6 COUNTRIES

Ni Putu Wiwin Setyari, Tri Widodo () and M. Edhie Purnawan ()
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M. Edhie Purnawan: Economics and Business Faculty, Gadjah Mada University, Jl. Sosio Humaniora Bulaksumur, Yogyakarta 55281, Indonesia

Review of Economic and Business Studies, 2016, issue 18, 183-209

Abstract: Heckscher-Ohlin-Mundell framework suggests that if a country has unexpectedly increased the permanent labour force, there will be a change in the production structure. Increases in the relative proportion of labour-intensive product demand occur and, hence, decrease the need for investment relative to domestic saving, and encourage the current account surplus. This paper tries to fill the empirical studies gap on the effects of the labour force, especially its utilization in the data panel of ASEAN + 6 countries using the generalized method of moments (GMM) used to capture the unobserved heterogeneity and endogeneity across countries that often arise in a panel data model. The estimation result shows that the labour force has an asymmetric shock and it only affects the country of origin, even when the financial institution deepening as a control variable is included. The analysis also indicates that labour regulations in these countries tend to be rigid because the speed with which the current account adjusts is relatively slow.

Keywords: saving–investment; current account adjustment; labour force shocks (search for similar items in EconPapers)
JEL-codes: E21 E24 F32 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:aic:revebs:y:2016:j:18:widodot

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