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The Importance of Agglomeration Economies and Technological Level on Local Economic Growth: the Case of Indonesia

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  • Adiwan F. Aritenang

    (Institut Teknologi Bandung (ITB))

Abstract

The centralised regime and variation of resources have led persistent regional disparities in Indonesia. Presently, there is lack of study that examines the impact of agglomeration economies and technology of firm establishment on regional growth in Indonesia. This paper applies agglomeration economies, approximated using proxy variables of concentration of four largest sectors (CR4), specialisation (LQ), diversity (DIV) and competition (COM) variables and technological capacity, approximated by total factor productivity (TFP), to explain the impact of firm establishment on economic growth. The paper found that districts with less specialisation and more advance technology would have higher economic growth. The paper recalls the importance of higher share of high-tech industry and a more spatial dispersion of industry to accelerate economic growth.

Suggested Citation

  • Adiwan F. Aritenang, 2021. "The Importance of Agglomeration Economies and Technological Level on Local Economic Growth: the Case of Indonesia," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(2), pages 544-563, June.
    • Handle: RePEc:spr:jknowl:v:12:y:2021:i:2:d:10.1007_s13132-021-00735-8
    DOI: 10.1007/s13132-021-00735-8
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