Academic journal article Australasian Journal of Regional Studies

Employment Growth and Spatial Concentration in Indonesia

Academic journal article Australasian Journal of Regional Studies

Employment Growth and Spatial Concentration in Indonesia

Article excerpt

1. INTRODUCTION

The spatial distribution of economic activity is altered over time by a very diverse array of factors. The level of technological development, sectoral composition, transport infrastructure, factor mobility, government policies, as well as more general socio-economic and cultural conditions all impact economic development and employment across space. Despite the fact that all of these characteristics are country specific, the majority of empirical research in this area has analyzed data from the U.S., either at the metropolitan area level (e.g. Henderson et at. 1995, Glaeser 1998, Carlino and Chatterjee 2002, Hansen 2004, Ioannides and Overman 2004, and Lee 2007) or county level (e.g. Beeson and DeJong 2002, Desmet and Fafchamps 2005, Partridge et at. 2008, 2009). Although the literature arrives at somewhat disparate conclusions, recent works have found that employment in U.S. large metropolitan areas has experienced de-concentration, while employment across U.S. counties has experienced concentration.

Given the heterogeneous nature of an economy's spatial distribution, other nations have inevitably experienced dissimilar dynamics in the geographical concentration of employment. For instance, differences in labour mobility, urban blight, transport infrastructure and pricing, and land use policies have altered the effects of agglomeration forces in the U.S. compared to other nations, which has resulted in a relatively greater level of suburbanization and lower employment density in U.S. cities compared to other nations (Mieszkowski and Mills 1993, Cairncross 1997).

The primary objective of this paper is to examine the factors that influence the spatial evolution of employment in Indonesia for the years 1994 and 2004. In particular, this paper seeks to understand the effect of regional employment characteristics, natural surroundings, distance to urban centers, population of neighboring areas, and sectoral specialization on aggregate and sector-specific employment growth rates. The contributions of this article are based on both the methodology employed and the geographical idiosyncrasies of Indonesia. For one, Indonesia is located in one of the most volatile areas on earth (the so-called "ring-of-fire"), with many areas prone to earthquakes, tsunamis, volcanic eruptions, droughts, and/or flooding. As a result, migration flow may be more heavily influenced by natural immunity to these hazards and public infrastructure compared to other nations. The fact that Indonesia is an archipelago will also influence employment growth dynamics compared to geographically contiguous nations. For example, a locality surrounded by water could face suppressed growth due to its natural isolation from surrounding economic activity and higher transport costs. By controlling for districts' spatial dependence with surrounding areas, island location, and its accessibility to other districts in terms of land and water surroundings, the results provide insight into the impact of continguous geographical distance compared to natural isolation on employment growth.

Furthermore, the empirical models measure how distance to urban areas of different sizes impacts employment growth in districts. The majority of previous works that measure the effects of proximity to urban areas do so without considering the geographic size or population levels of the areas. (1) The dynamics of employment growth in any area will depend on not just whether it is near or neighboring a city, but both the relative size and employment density of that city. For instance, Carlino and Chatterjee (2002) suggest that regional employment patterns are driven by how aggregate employment changes affect agglomeration and congestion costs in cities. The ability of a city to accommodate a larger population will depend on its own population characteristics and those of neighboring areas. This is especially true in Indonesia, or any country with a highly fragmented infrastructure. …

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