This paper investigates the relationship between structural change and regional economic growth in Indonesia. We utilize several measures of structural change, i.e. structural change index, norm absolute value index, shift-share method, and effective structural change index, for 30 provinces over the period 2005-2018. We show that the structural change has occurred across provinces, even though it is slowing, towards an agricultural-services transition. By employing dynamic panel data models, this study shows that structural change is a significant determinant of growth.
In the next few decades, Indonesia will experience significant demographic transition such as increasing productive age cohort and ageing populations. This study aims to construct a framework to analyze the nexus between demographic transition, Indonesian economy, and the state budget. This study uses 3Ps (productivity, proportion, and participation) model as a basic framework. Further, this paper differentiates between demographic related tax revenue and non-demographic. We find that productivity is the main engine of the economic growth in both historical data points and in our future projection. Also, ageing populations would hamper the economy in the future through lower productivity. Hence in the short run, taxation agenda should focus on extending tax base to capture the demographic transition. In the long run, maintaining taxpayers to keep paying tax properly is an appropriate strategy. These could be done by early tax education and transparency in managing tax revenue.
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