Unemployment Dynamics in Decentralized Indonesia: The Role of Basic Technology, Household Investment, and Regional Poverty
Zainul Hasan, Dyah Wulan Sari

Faculty of Economics and Business,Airlangga University, Indonesia

Abstract

This study aims to analyze the factors that influence the unemployment rate at the district and city levels in Indonesia during the period 2010-2019. Using panel data from the Indonesia Database for Policy and Economic Research (INDO-DAPOER), this study applies a fixed effects model with clustered standard errors to identify the influence of economic, social, and basic technological variables on interregional unemployment variation. The results of the analysis indicate that economic growth has a significant negative effect on unemployment, confirming the role of growth in job creation. Literacy rates begin to show a significant effect after the inclusion of control variables, indicating the importance of education in the long term. Conversely, poverty shows a positive and consistent relationship with unemployment, revealing the structural link between the two issues. The variable of access to electricity-used as a proxy for basic technology-has a significant negative effect on unemployment rates. This indicates that the availability of basic technology promotes increased productivity and expanded access to economic opportunities. In addition, access to clean water and sanitation also contributes to reducing unemployment. Household spending on education and health has been shown to significantly reduce unemployment, reflecting that individual investment in human capital can reduce unemployment. The interaction between poverty and access to electricity indicates that increasing access to electricity can reduce the negative effects of poverty on unemployment. These findings emphasize the importance of locally-based policies that promote the expansion of basic technology and increase household capacity as a strategy for sustainable unemployment reduction.

Keywords: Unemployment- Poverty rate- Technology- Household Expenditure- Literacy Rate

Topic: Development economics