Spatial Analysis of Youth Unemployment in Indonesia: Minimum Wages and Industrial Mix

Mayrano Andrianus Sitinjak () and Diny Ghuzini ()
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Mayrano Andrianus Sitinjak: Badan Pusat Statistik Kabupaten Empat Lawang
Diny Ghuzini: Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada

No 202308008, Gadjah Mada Economics Working Paper Series from Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada

Abstract: This study examines the spatial distribution of youth unemployment rates (15–24 years old) and the impact of wages and industrial composition on these rates in Indonesian provinces. The persistently high youth unemployment rate and uneven distribution of youth labor across provinces have motivated this research. Data from 2010 to 2018, sourced from Sakernas and other BPS publications, were analyzed for 33 Indonesian provinces. This study employed Moran's index and spatial panel data regression methods. The findings reveal a clustered spatial pattern of youth unemployment rates among provinces. The best-fitting model, identified as the Spatial Durbin Model (SDM) with random effects, indicates that increasing the minimum wage ratio significantly contributes to higher youth unemployment rates. Conversely, higher real wages lead to a slight decrease, whereas greater industrial sector absorption reduces youth unemployment. However, increased absorption in the service sector amplifies youth unemployment.

Keywords: Youth Unemployment; Minimum Wages; Industrial Mix; Spatial Panel (search for similar items in EconPapers)
JEL-codes: C23 J30 J46 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2023-08
New Economics Papers: this item is included in nep-inv, nep-lma, nep-sea and nep-ure
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