The Effect of Investment and Unemployment Rate on Economic Growth in Indonesia

S. Hasdiana (), Rahmatia Rahmatia, Fatmawati Fatmawati and Anas Iswanto
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S. Hasdiana: Hasanuddin University, Economics Doctoral Program Student, Postgraduate Faculty of Economics and Business
Rahmatia Rahmatia: Hasanuddin University, Faculty of Economics and Business
Fatmawati Fatmawati: Hasanuddin University, Faculty of Economics and Business
Anas Iswanto: Hasanuddin University, Faculty of Economics and Business

A chapter in Proceedings of the 9th International Conference on Accounting, Management, and Economics 2024 (ICAME 2024), 2025, pp 189-203 from Springer

Abstract: Abstract This study aims to analyze the effect of investment and unemployment rates on economic growth in 10 provinces in Indonesia during the period of 2013-2022. The research employs a panel data regression method with a fixed effect model to examine the partial and simultaneous effects between the independent variables, namely investment and unemployment rates, on the dependent variable, economic growth. The partial test results show that investment has a positive and significant effect on unemployment rates but a negative and statistically insignificant effect on economic growth. On the other hand, the simultaneous test results indicate that investment and unemployment rates together have a significant influence on economic growth. This suggests a mismatch in investment allocation, where investments are predominantly directed towards capital-intensive sectors that do not absorb large amounts of labor, as well as the lack of investment effectiveness in driving short-term economic growth.

Keywords: Investment; unemployment rate; economic growth; fixed effect model (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-758-8_18

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DOI: 10.2991/978-94-6463-758-8_18

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