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Structural Change and Regional Economic Growth in Indonesia

Andriansyah Andriansyah (), Asep Nurwanda and Bakhtiar Rifai

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the relationship between structural change and regional economic growth in Indonesia. We utilize several measures of structural change, i.e. structural change index, norm absolute value index, shift-share method, and effective structural change index, for 30 provinces over the period 2005-2018. We show that the structural change has occurred across provinces, even though it is slowing, towards an agricultural-services transition. By employing dynamic panel data models, this study shows that structural change is a significant determinant of growth. However, structural change matters for growth only if there is an increase in productivity, not only a movement of labor across sectors. An improvement in productivity within sectors and a movement of labors to other sectors with better productivity lead to a better economic development.

Keywords: Structural Change; Regional Growth; Indonesia; Productivity (search for similar items in EconPapers)
JEL-codes: L16 O40 R11 (search for similar items in EconPapers)
Date: 2020-08-07
New Economics Papers: this item is included in nep-cwa, nep-fdg, nep-geo, nep-sea, nep-tid and nep-ure
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