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Income and subtitution effect of Indonesian labour supply

Author

Listed:
  • Rindang Rayo Ranas

    (Pusat Studi Pengembangan Tenaga Kerja dan Sumber Daya Manusia)

Abstract

Indonesia is the fifth largest populated country in the world with abundance of labour supply. There are two types of analysis that can explain the phenomenon of labour supply, namely the income effect and substitution effect. The purpose of this study is to estimate the income effect and substitution effect of labour supply in Indonesia during 2005-2008. Using a panel data analysis technique, the results show that the income effect dominates the substitution effect in influencing the level of labour supply in Indonesia. This means that changes in labour income is more influential on a person's decision not to engage in the labour market.

Suggested Citation

  • Rindang Rayo Ranas, 2011. "Income and subtitution effect of Indonesian labour supply," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 3(1), pages 17-26, April.
    • Handle: RePEc:uii:journl:v:3:y:2011:i:1:p:17-26
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    References listed on IDEAS

    as
    1. Müller, Kai-Uwe & Steiner, Viktor, 2010. "Labor Market and Income Effects of a Legal Minimum Wage in Germany," IZA Discussion Papers 4929, Institute of Labor Economics (IZA).
    2. Kai-Uwe Müller & Viktor Steiner, 2010. "Labor Market and Income Effects of a Legal Minimum Wage in Germany," Discussion Papers of DIW Berlin 1000, DIW Berlin, German Institute for Economic Research.
    3. Ghialy Yap, 2010. "Australian domestic tourism demand analysis using panel data static regression," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 2(2), pages 113-127, April.
    4. Torberg Falch, 2010. "The Elasticity of Labor Supply at the Establishment Level," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 237-266, April.
    5. Yair Eilat & Liran Einav, 2004. "Determinants of international tourism: a three-dimensional panel data analysis," Applied Economics, Taylor & Francis Journals, vol. 36(12), pages 1315-1327.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Labour supply; income effect; substitution effect; panel data;
    All these keywords.

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J29 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Other

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