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Local economic structure, productivity growth, and industry life cycle: evidence from Indonesia

Khoirunurrofik ()
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Khoirunurrofik: Universitas Indonesia

Asia-Pacific Journal of Regional Science, 2018, vol. 2, issue 2, 453-475

Abstract: Abstract This paper examines the effects of dynamic agglomeration economies on the productivity growth of the industries in Indonesia’s regions. The study introduces employment market potential into the city-industry growth estimation for controlling local size and preventing overestimation of the agglomeration effects. The results suggest that both specialization and diversity are important for city-industry growth and that some externalities are stronger in different time periods. The effects of specialization and diversity on medium-term growth (2000–2010) are stronger than on long-term growth (1990–2010), in addition to new positive effects of competition. A detailed analysis across industries reveals a strong relationship between local industrial structure and performance—productivity and employment growth—which is associated with industry maturity within its lifecycle stages.

Keywords: Employment market potential; Local industrial structure; Industry life cycle (search for similar items in EconPapers)
JEL-codes: R11 R12 O47 L20 (search for similar items in EconPapers)
Date: 2018
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