Agglomeration and Urban Manufacture Labor Productivity in Indonesia

Abstract

Agglomeration, the spatial concentration of industries in a specific location, has been argued to improve productivity since it could provide positive externalities such as knowledge spillover, input sharing, and labor pooling. This paper examines the effect of large and medium manufacturing industry (LMI) agglomeration on labor productivity. Measuring the output and labor density as agglomeration effect by using 2009-2014 panel data from 44 cities and regions across the metropolitan areas of Indonesia, this study shows that in terms of output share, agglomeration positively contributes to labor productivity. On the other hand, in terms of labor density, agglomeration results in a negative impact on productivity. These findings suggest the government should expand industrial clusters in less densely populated areas, especially outside the island of Java, by providing necessary infrastructures such as electricity, ports, and roads, so that this development creates favorable economic conditions for investment and industrial development in such areas. AbstrakAglomerasi, konsentrasi spasial industri di lokasi tertentu, dikaitkan untuk meningkatkan produktivitas karena eksternalitas positif yang ditimbulkan seperti limpahan pengetahuan (knowledge spillover), sharing input produksi, dan penggabungan tenaga kerja (labor pooling). Makalah ini mengkaji pengaruh aglomerasi industri manufaktur besar dan sedang (IBS) terhadap produktivitas tenaga kerja. Efek aglomerasi diukur menggunakan output dan kepadatan tenaga kerja. Dengan menggunakan data panel dari 44 kota dan kabupaten di seluruh wilayah metropolitan di Indonesia dari 2009-2004, penelitian ini menunjukkan bahwa aglomerasi bersifat sebagai pedang bermata dua. Dalam hal share output, aglomerasi secara positif berkontribusi terhadap produktivitas tenaga kerja. Di sisi lain, dalam hal kepadatan tenaga kerja, aglomerasi menghasilkan dampak negatif pada produktivitas. Temuan-temuan ini mengindikasikan bahwa pemerintah harus memperluas klaster industri di daerah-daerah berpenduduk rendah, terutama di luar pulau Jawa, dengan menyediakan infrastruktur dasar seperti listrik, pelabuhan, dan jalan, sehingga pembangunan ini menciptakan kondisi ekonomi yang menguntungkan untuk investasi dan pengembangan industri daerah tersebut.Kata Kunci: aglomerasi, output industry, kepadatan tenaga kerja, produktivitas tenaga kerja JEL Code: R11, R12, J24

Rethinking Post-Pandemic Labor Policies: Insights from Precarious Workers in Indonesia

“…It occurs alongside changes in the global production networks, trade liberalization, and economic restructuring in most countries. Flexible labor regulations are favored by large corporations since they enhance competitiveness in the business environment with rapidly changing markets and technologies and may help them adjust to economic crises (Wibowo, 2020). Corporations often seek flexible employment relations that permit the diminishing, reassignment, and redeployment of workforces with ease.…”