Judul: Disparity, convergence, and determinant of regional labour productivity in Indonesia
Abstrak: Generally, economic development has focused on an effort to increase economic growth which is closely related to national income both in total and per capita term. It aims to improve citizen’s welfare as a final goal. The result of economic growth is expected to be distributed evenly throughout the citizen so that the socio-economic issues such as unemployment, poverty, income distribution inequality, etc can be solved through the principle of trickle-down effect mechanism (Todaro and Smith, 2006). Indonesia consists of 33 provinces with different economic structures according to the various factors endowments possessed. It encourages regional disparities in economic performance because of the differences in the speed of economic growth among provinces, where output of provinces rich with factor endowments is certainly greater than provinces with factor endowment scarcity. Labour productivity disparity is a phenomenon experienced by Indonesia during the period 1987-2011. Prediction of the convergence is expected to reduce that inequality. This requires the condition in which provinces with lower labour productivity grow faster than provinces with higher labour productivity. Weighted coefficient of variation values of labour productivity in aggregate, agriculture, and manufacturing sectors state that labour productivity disparity in Eastern Indonesia is more unequal than in Western Indonesia with labour productivity in manufacturing sector is more unequal than in agriculture sector. Estimation model of labour productivity convergence in aggregate, agriculture, and manufacturing sector with Sys-GMM dynamic panel approach meet the appropriate dynamic panel data model’s criteria which is unbiased, consistent, and valid. Coefficient estimators of lag labour productivity variable both in aggregate, agriculture, and manufacturing sector model with Sys-GMM approach which are smaller than one state that the process of convergence occurs related to labour productivity disparity in aggregate, agriculture, and manufacturing sector in Indonesia. Speed of convergence and half time convergence of aggregate labor productivity in Indonesia are slower than in agriculture and manufacturing sector. Then, in comparison between agriculture and manufacturing sector, speed of convergence and half-time convergence of labor productivity in agriculture sector are slower than in manufacturing sector. The convergence models above also provide information on several factors that affect regional labour productivity in Indonesia in aggregate, agriculture, and manufacturing sector with the assumption that they provide the same effect on every province both Western and Eastern Indonesia. Intervention on these factors should be done so convergence process can be accelerated. Lag labour productivity, restricted physical capital stock, restricted human capital stock, total trade, and real wage have positive effect on aggregate labour productivity in Indonesia. Furthermore, lag labour productivity, physical capital stock, human capital stock, total trade, and real wage have positive effect while the depreciation rate has negative impact on agriculture and manufacturing sector labour productivity in Indonesia. Although government must implement fair policies to all people to prevent the emergence of social jealousy related to disparity problem, government should prioritize to overcome labour productivity disparity in Eastern Indonesia than in Western Indonesia due to the disparity condition which is worse in Eastern Indonesia both in aggregate, in agriculture, and manufacturing sectors. Intervention should focus on provinces with lower labour productivity so that their
Keyword: labour productivity disparity, agriculture, manufacturing, dynamic panel