Open AccessDinamika PMA dan PMDN di Indonesia Sebagai Dampak Dari Upah Minimum, Inflasi dan PDRB Tahun 2004-2012: Pendekatan Dynamic Panel Data Model
Author(s) -
Lea Widowati Sugiharto,
Akhmad Syakir Kurnia
Publication year - 2016
Publication title -
jurnal ekonomi dan bisnis
Language(s) - English
Resource type - Journals
eISSN - 2528-0147
pISSN - 1979-6471
DOI - 10.24914/jeb.v17i3.305
Subject(s) - economics , productivity , wage , panel data , foreign direct investment , inflation (cosmology) , investment (military) , monetary economics , short run , product (mathematics) , minimum wage , wage share , production (economics) , labour economics , demographic economics , efficiency wage , macroeconomics , econometrics , physics , geometry , mathematics , politics , theoretical physics , political science , law
This paper aims at investigating the behavior of foreign direct investment (FDI) and domestic direct investment (DDI) in Indonesia, which is expected to be explained by several explanatory variables including the setting of regional minimum wage, inflation, as well as regional domestic product. More specifically, the investigation is focused on the effect of annual increase in the minimum regional wage, provided that it is a sensitive issue for investors. Using 33 provincial level data in a period from 2004 to 2012, this paper uses a dynamic panel data which allows us to see the behavior of direct investment in the short run as well as in the long run. The result shows that an increase in the regional minimum wage setting reduces both DDI and FDI in the short run. However, in the long run, an increase in the regional minimum wage is likely to increase both DDI and FDI. This is likely indicating that in the long run an increase in wage is expected to be accompanied by higher productivity, eventhough in the short run higher wage increases cost of production which will undermine investment.