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

Author

Listed:
  • Mayrano Andrianus Sitinjak

    (Badan Pusat Statistik Kabupaten Empat Lawang)

  • Diny Ghuzini

    (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.

Suggested Citation

  • Mayrano Andrianus Sitinjak & Diny Ghuzini, 2023. "Spatial Analysis of Youth Unemployment in Indonesia: Minimum Wages and Industrial Mix," Gadjah Mada Economics Working Paper Series 202308008, Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada.
    • Handle: RePEc:gme:wpaper:202308008
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Youth Unemployment; Minimum Wages; Industrial Mix; Spatial Panel;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market

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