1
Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
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ISSN:1991-8178
EISSN: 2309-8414
Journal home page: www.ajbasweb.com
THE EFFECTS OF AGGREGATE DEMAND MANAGEMENT AND AGGREGATE
SUPPLY POLICY ON SACRIFICE RATIO IN INDONESIA (2006-2014)
Amanus Khalifah Fil’ardy Yunus1, I Made Benyamin2, Marsuki3, Sanusi Fattah4
1
Hasanuddin University, Economic Department, Faculty of Economics & Business,Box 9024 , South Sulawesi, Makassar, Indonesia,
Hasanuddin University, Economic Department, Faculty of Economics & Business,Box 9024 , South Sulawesi, Makassar, Indonesia,
3
Hasanuddin University, Economic Department, Faculty of Economics & Business,Box 9024 , South Sulawesi, Makassar, Indonesia,
4
Hasanuddin University, Economic Department, Faculty of Economics & Business,Box 9024 , South Sulawesi, Makassar, Indonesia,
2
ABSTRACT: This research is intended to know: (1) How much the influence of government
expenditure, spending on education and health, bank credit, regional minimum wage and property
price index on the sacrifice ratio, both directly and indirectly through manufacturing productivity,
trade opennes, economic growth and educated unemployment in Indonesia; (2) How much the
influence of manufacturing productivity on the sacrifice ratio, both directly and indirectly through
trade opennes, economic growth and educated unemployment in Indonesia; (3) How much the
influence of trade opennes on the sacrifice ratio, both directly and indirectly through economic
growth and educated unemployment in Indonesia; (4) How much the influence of economic growth on
the sacrifice ratio, both directly and indirectly through educated unemployment in Indonesia. The
data used are secondary data that obtained from Central Bureau of Statistics and Bank of Indonesia.
The unit of analysis are the cross-sectional data from 31 provinces in Indonesia (2006-2014). The
method of analysis employed is the estimation method of simultaneous equation. The research
findings indicate that government expenditure, manufacturing productivity and educated
unemployment have a negative impact on the sacrifice ratio in Indonesia. Meanwhile, bank credit,
regional minimum wage, property price index and trade opennes have a positive impact on the
sacrifice ratio in Indonesia. Finally, spending on education and health and economic growth have no
impact on the sacrifice ratio in Indonesia.
Keywords: sacrifice ratio, manufacturing productivity, trade opennes, economic growth, educated
unemployment and macroeconomic policy
1. INTRODUCTION
Disinflation will always require the
sacrifice of excess unemployment from the
natural rate. The magnitude of such excess is
then known as the sacrifice ratio. The natural
rate here is defined as the non-accelerating
inflation rate of unemployment/NAIRU
(Kugler and Sheldon, 2009; King, 2008;
Pena, 2003; Michl, 2002; Callen et al., 2001;
Zhang, 2001; Motley, 1990).
Monetary policy authorities to curb
inflation by reducing money growth would
lead to economic growth fell away from its
natural level. This then led to rising
unemployment and the sacrifice ratio (Okun,
1982). Purchasing power, aggregate demand
and inflation then falls (Philips, 1958).
Furthermore, while maintaining and
controlling the sacrifice ratio at a certain
period until inflation fell more than the
decline in money growth, purchasing power
and aggregate demand then gradually
increased. This opens up a space revival of
economic growth. The ultimate effect of these
cases, the unemployment rate fell and
unemployment due to the sacrifice of
disinflation can be covered (Blanchard, 2003).
Again, disinflation will lead to costs in
the form of rising unemployment. However,
with a good control on the sacrifice ratio for a
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Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
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ISSN:1991-8178
EISSN: 2309-8414
Journal home page: www.ajbasweb.com
certain period, the disinflation costs can be
covered. The problem that then needs to be
examined is how much and for how long the
duration of the sacrifice ratio to be borne?
How did the influence of macroeconomic
policy on this scale?
2. RESEARCH PROBLEM
Indeed, it is this that is faced by policy
makers in Indonesia, especially the monetary
authorities. Here, the sacrifice ratio has been
duly become the main reference in evaluating
the
performance
of
macroeconomic
management (aggregate demand-aggregate
supply/AD-AS) in Indonesia. Because on the
other hand, also have not found any
agreement to determine the amount of
inflation (inflation targeting) that can be
tolerated better to achieve the level of
economic growth and the unemployment rate
specified. In addition, from some previous
research on the sacrifice ratio, not many
research focus on the sacrifice of the
unemployment generated by disinflationary
policy.
Meanwhile, poor control in excess of
unemployment arising from disinflation will
result in permanent injury, commonly called
hysteresis (Cintado, Avila and Usabiaga,
2014). Starting from the impact of the
recession (disinflation) which resulted in the
unemployed and the loss of expertise and
ability to find work, unemployment will
remain, even after the recession ends. Long
periods of unemployment can change
individual attitudes toward work and lowered
his desire to find a job (O'Shaughnessy,
2011).
Furthermore, the overall unemployment
rate was realized there were some of them are
educated unemployment (Elwin, 2004). The
expense of candidates earning this kind of
course is a big loss. It has also become a sign
of the decline in the quality of education as
well as on efforts to improve the quality of
human resources. Therefore, analyzing the
role of educated unemployment in
determining the magnitude of the sacrifice
ratio is something that is very worthy to be
studied (Kula and Aslan, 2014).
Meanwhile, openness to trade is a
major determinant when linked with lowering
costs due to inflation and permanent scars in
the form of unemployment that continue to
happen (Cintado, Avila and Usabiaga, 2014).
Indicators of openness of an economy can be
seen from how much both imports and
exports of a country (total trade). The greater
the extent of international trade, the more it
will encourage the opening of new jobs. In
other words, the economy is growing so it
will reduce the level of unemployment
sacrifice (Yanikkaya, 2003).
Furthermore, the high quality of
workers is a measure of increasing the
productivity of the sector led to the possibility
of workers in the sector to be sacrificed will
be smaller. Given also high productivity
levels are generally found in the
manufacturing industry. Therefore, the
productivity of the manufacturing sector will
greatly affect the size of the sacrifice ratio of
unemployment (Kula and Aslan, 2014).
Keynesian then added that in the
short-run, the relationship between
inflation and unemployment is only
determined by the demand shockand
supply shock (Blinder and Rudd, 2008;
Estrella, 1997). However, fluctuations in
the main variables that affect aggregate
demand (fiscal and monetary policy) and
aggregate supply (the aggressiveness of
the workers in demanding wage and
policy entrepreneurs in determining the
price) in the long term could alter
economic welfare by pushing the
unemployment rate away or closer to the
natural rate and even changing the natural
rate of unemployment (Mankiw, 2003 and
Pena, 2003).
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Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
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ISSN:1991-8178
EISSN: 2309-8414
Journal home page: www.ajbasweb.com
3. RESEARCH QUESTION
Based on the description of the
background of the problems, then the main
problem in this research are:
1. How macroeconomic management through
the Aggregate Demand policies have an
impact on the Sacrifice Ratio, ie, in this
case:
a. Is government spending at the provincial
level affect the Sacrifice Ratio, both directly
and
through
the
Manufacturing
Productivity, Trade Opennes, Economic
Growth and Educated Unemployment in
Indonesia.
b. Are Education and Health Spending at the
provincial level affect the Sacrifice Ratio,
both
directly
and
through
the
Manufacturing
Productivity,
Trade
Opennes, Economic Growth and Educated
Unemployment in Indonesia.
c. Is Bank Credit at the provincial level affect
the Sacrifice Ratio, both directly and
through the Manufacturing Productivity,
Trade Opennes, Economic Growth and
Educated Unemployment in Indonesia.
2. How macroeconomic management through
the Aggregate Supply policies have an
impact on the Sacrifice Ratio, ie, in this
case:
a. Do UMR in every province affect the
Sacrifice Ratio, both directly and through
the Manufacturing Productivity, Trade
Opennes, Economic Growth and Educated
Unemployment in Indonesia.
b. Is Property Price Index in each of the
provinces affect the Sacrifice Ratio, both
directly and through the Manufacturing
Productivity, Trade Opennes, Economic
Growth and Educated Unemployment in
Indonesia.
3. Is the Manufacturing Productivity in every
province affect the Sacrifice Ratio, either
directly or through Trade Opennes,
Economic
Growth
and
Educated
Unemployment in Indonesia.
4. Are Trade Opennes at the provincial level
affect the Sacrifice Ratio, either directly or
through the Economic Growth and
Educated Unemployment in Indonesia.
5. Is Economic Growth in each province
affect the Sacrifice Ratio, either directly or
through the Educated Unemployment in
Indonesia.
In line with the formulation of the
subject matter of research, the objectives of
this research are:
1. In the context of the policy impact of the
Sacrifice Ratio Aggregate Demand, are as
follows:
a. To find out and analyze how much
influence of government spending to the
Sacrifice Ratio at the provincial level, both
directly and through the Manufacturing
Productivity, Trade Opennes, Economic
Growth and Educated Unemployment in
Indonesia.
b. To find out and analyze how much
influence of the Education and Health
Spending to the Sacrifice Ratio at the
provincial level, both directly and through
the Manufacturing Productivity, Trade
Opennes, Economic Growth and Educated
Unemployment in Indonesia.
c. To find out and analyze how much
influence of Bank Credit to the Sacrifice
Ratio at the provincial level, both directly
and
through
the
Manufacturing
Productivity, Trade Opennes, Economic
Growth and Educated Unemployment in
Indonesia.
2. In the context of Aggregate Supply impact
on the Sacrifice Ratio, are as follows:
a. To find out and analyze how much
influence of the minimum wage for each
province to the Sacrifice Ratio, both
directly and through the Manufacturing
Productivity, Trade Opennes, Economic
Growth and Educated Unemployment in
Indonesia.
b. To find out and analyze how much
influence of Property Price Index in each
4
Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
SCIENCES
ISSN:1991-8178
EISSN: 2309-8414
Journal home page: www.ajbasweb.com
provinces to the Sacrifice Ratio, both
directly and through the Manufacturing
Productivity, Trade Opennes, Economic
Growth and Educated Unemployment in
Indonesia.
3. To know and analyze how much influence
of the productivity of manufacturing sector
in each province to the Sacrifice Ratio,
either directly or through Trade Opennes,
Economic
Growth
and
Educated
Unemployment in Indonesia.
4. To know and analyze how much influence
of Trade Opennes at the provincial level to
the Sacrifice Ratio, either directly or
through the Economic Growth and
Educated Unemployment in Indonesia.
5. To know and analyze how much influence
Economic Growth in each province to the
Sacrifice Ratio, either directly or through
the Educated Unemployment in Indonesia.
4. METHOD OF RESEARCH
The data used in this research is
secondary data obtained from Bank Indonesia
and the Central Bureau of Statistics (BPS), in
which the financial data obtained from Bank
Indonesia. Estimation, analysis and research
carried out using panel data that is combined
time series (yearly from 2006 through 2014)
and the cross-section (31 provinces in
Indonesia) with the location of the research is
the Indonesian territory as a whole.
Simultaneus Equation Model (SEM) in
this research can be seen in the following
functional equation:
y1 = α 0 + α1 x1 + α2 x2 + α 3x 3 + α 4x 4 + α 5x 5 +
µ1
(1)
y2 = β0 + β 1 y1 + β 2x 1 + β 3x 2 + β4 x3 + β 5x 4 +
β 6x 5 + µ 2
(2)
y3 = γ 0 + γ 1 y1 + γ 2 y2 + γ 3x 1 + γ 4x 2 + γ 5x 3 +
γ 6x 4 + γ7 x5 + µ 3
(3)
y4 = δ0 + δ 1 y1 + δ2 y2 + δ 3y3 + δ4 x1 + δ5 x2 +
δ 6 x3 + δ 7x 4 + δ8 x5 + µ 4
(4)
y5 = ε 0 + ε1 y1 + ε2 y2 + ε 3y3 + ε 4 y4 + ε 5x 1 +
ε 6x 2 + ε7 x3 + ε 8x 4 + ε 9x 5 + µ5
(5)
Where, y5 is sacrifice ratio, measured in
ratio; y4 is educated unemployment rate,
measured in percent; y3 is economic growth,
measured in percent; y2 is trade opennes,
measured in ratio; y1 is manufacturing
productivity, measured in rupiah/person; x1 is
government spending, measured in rupiah; x2
is education and health spending, measured in
rupiah; x3 is bank credit, measured in rupiah;
x4 is provincial minimum wage, measured in
rupiah; x5 is property price index, measured in
ratio; α0, β0, γ0, δ0 and ε0 are constants; α1, ...
αn, β1 ... βn, γ1 ... γn, δ1, ... δn and ε1 ... εn are
each as parameters to be estimated; μ1, μ2, μ3,
μ4 and μ5 is random error terms.
The reduced form based on Equation 15 can be presented in the following equation:
y1 = α 0 + α1 x1 + α2 x2 + α 3x 3 + α 4x 4 + α 5x 5 +
µ1
(6)
y2 = ζ 0 + ζ1 x1 + ζ 2x 2 + ζ 3x 3 + ζ 4x 4 + ζ 5x 5 +
µ 12
(7)
y3 = η 0 + η 1x 1 + η2 x2 + η 3x 3 + η 4x 4 + η5 x5 +
µ 123
(8)
y4 = θ 0 + θ1 x1 + θ 2x 2 + θ 3x 3 + θ4 x4 + θ 5x 5 +
µ 1234
(9)
y5 = ι 0 + ι1 x1 + ι 2x 2 + ι 3x 3 + ι 4x 4 + ι 5x 5 +
µ 12345
(10)
Where, α0, ζ 0 , η0 , θ 0 and ι0 are
constants; α1, ... αn, ζ 1 ... ζ n , η 1 ... η n, θ 1 , ... θ n
and ι 1 ... ι n are the total effect of variable
x1,…,xn to variable y1,…,yn; μ12, μ123, μ1234
and μ12345 is composite random error.
5. ANALYSIS AND DISCUSSION
The estimate results of the research can
be seen in Tabel 1:
Tabel 1. The Estimate Results
Directions
of Effect
x 1 => y1
x 2 => y1
x 3 => y1
x 4 => y1
x 5 => y1
y1 => y2
x 1 => y2
Regression
Coefficients
1,175*
-0.681*
0,186*
0,463*
-0,006*
0,439*
-0,156
t-Statistic
Prob.
22,449
-15,019
5,256
3,268
-4,571
6,441
-1,569
0,000
0,000
0,000
0,001
0,000
0,000
0,117
5
Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
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ISSN:1991-8178
EISSN: 2309-8414
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x 2 => y2
0,507*
7,324
0,000
x 3 => y2
-0,272*
-6,477
0,000
x 4 => y2
1,113*
6,797
0,000
x 5 => y2
-0,008*
-5,224
0,000
y1 => y3
0,214
1,032
0,302
y2 => y3
-0,031
-0,180
0,857
x 1 => y3
-1,533*
-5,378
0,000
x 2 => y3
-0,539*
-2,504
0,012
x 3 => y3
1,007*
7,836
0,000
x 4 => y3
1,234*
2,450
0,014
x 5 => y3
-0,003
-0,695
0,487
y1 => y4
0,010
0,441
0,659
y2 => y4
-0,061*
-3,262
0,001
y3 => y4
0,001
0,191
0,849
x 1 => y4
-0,061
-1,868
0,062
x 2 => y4
0,120*
5,064
0,000
x 3 => y4
-0,022
-1,405
0,160
x 4 => y4
0,370*
6,657
0,000
x 5 => y4
-0,004*
-6,948
0,000
y1 => y5
0,254*
2,942
0,003
y2 => y5
-0,256*
-3,553
0,000
y3 => y5
-0,037
-1,472
0,141
y4 => y5
0,876*
3,844
0,000
x 1 => y5
0,677*
5,417
0,000
x 2 => y5
-0,040
-0,419
0,675
x 3 => y5
-0,491*
-8,308
0,000
x 4 => y5
-2,705*
-11,907
0,000
x 5 => y5
-0,010*
-4,610
0,000
*) Significant at α = 5%; R 2 𝑦1 = 0,739; R2𝑦2 =
0,459; R 2𝑦3 = 0,387; R2𝑦4 = 0,336; R2𝑦5 =
0,654;N = 279
The direct effect of government
spending on the sacrifice ratio shows a
positive and significant effects. This means
that increase in government spending will
increase unemployment sacrifice ratio, vice
versa. These results are not in accordance
with the initial hypothesis which states that
government spending negatively impact
directly and significantly to the sacrifice ratio
unemployment. Moreover, this result is also
not in accordance with the theory of Gordon
(2004) which states that government spending
is negatively correlated with the sacrifice
ratio.
The direct effect of government
spending on the manufacturing productivity
showed a significant and positive effect. This
means that increase in government spending
will increase manufacturing productivity.
These results are also consistent with the
theory of Dutta (2007) which states that
government spending is positively correlated
with the manufacturing productivity.
The direct effect of government
spending on the trade opennes shown a
insignificant effect. This means that change in
government spending will not affect the trade
opennes. These result is not consistent with
the theory of Young and Darity (2004) which
states that government spending is positively
correlated with the trade opennes.
The direct effect of government
spending on the economic growth showed a
significant and negative effect. This means
that increase in government spending will
decrease economic growth. These result
inconsistent with the theory of Diamond
(1989) which states that government spending
is positively correlated with the economic
growth.
The direct effect of government
spending on the educated unemployment
shown a insignificant effect. This means that
change in government spending will not
affect the educated unemployment. These
result is not consistent with the theory of
Iannelli (2002) which states that government
spending is negatively correlated with the
educated unemployment.
The direct effect of education and
health spending on the sacrifice ratio shown a
insignificant effects. This means that change
in education and health spending will not
affect unemployment sacrifice ratio. These
results are not in accordance with the initial
hypothesis which states that the kind of
spending negatively impact directly and
significantly
to
the
sacrifice
ratio
unemployment. Moreover, this result is also
not in accordance with the theory of Gordon
6
Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
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ISSN:1991-8178
EISSN: 2309-8414
Journal home page: www.ajbasweb.com
(2004) which states that education and health
spending is negatively correlated with the
sacrifice ratio.
The direct effect of education and
health spending on the manufacturing
productivity showed a significant and
negative effect. This means that increase in
education and health spending will decrease
manufacturing productivity. These results
inconsistent with the theory of Butter and
Koopman (1996) which states that education
and health spending is positively correlated
with the manufacturing productivity.
The direct effect of education and
health spending on the trade opennes shown a
significant and positive effect. This means
that increase in education and health spending
will increase the trade opennes. These result
consistent with the theory of Young and
Darity (2004) which states that education and
health spending is positively correlated with
the trade opennes.
The direct effect of education and
health spending on the economic growth
showed a significant and negative effect. This
means that increase in education and health
spending will decrease economic growth.
These result inconsistent with the theory of
Diamond (1989) which states that education
and health spending is positively correlated
with the economic growth.
The direct effect of education and
health
spending
on
the
educated
unemployment shown a significant and
positive effect. This means that increase in
education and health spending will increase
the educated unemployment. These result is
not consistent with the theory of Iannelli
(2002) which states that education and health
spending is negatively correlated with the
educated unemployment.
The direct effect of bank credit on the
sacrifice ratio shown a significant and
negative effects. This means that increase in
bank credit will decrease unemployment
sacrifice ratio. These results accordance with
the initial hypothesis which states that bank
credit negatively impact directly and
significantly
to
the
sacrifice
ratio
unemployment. Moreover, this result is also
accordance with the theory of Temple (2002)
which states that bank credit is negatively
correlated with the sacrifice ratio.
The direct effect of bank credit on the
manufacturing productivity showed a
significant and positive effect. This means
that increase in bank credit will increase
manufacturing productivity. These results
consistent with the theory of Gertler and
Gilchrist (1991) which states that bank credit
is
positively
correlated
with
the
manufacturing productivity.
The direct effect of bank credit on the
trade opennes shown a significant and
negative effect. This means that increase in
bank credit will decrease the trade opennes.
These result inconsistent with the theory of
Young and Darity (2004) which states that
bank credit is positively correlated with the
trade opennes.
The direct effect of bank credit on the
economic growth showed a significant and
positive effect. This means that increase in
bank credit will increase economic growth.
These result consistent with the theory of
Young and Darity (2004) which states that
bank credit is positively correlated with the
economic growth.
The direct effect of bank credit on the
educated
unemployment
shown
a
insignificant effect. This means that change in
bank credit will not affect the educated
unemployment. These result is not consistent
with the theory of Jefferson (2005) which
states that bank credit is negatively correlated
with the educated unemployment.
The direct effect of minimum wage on
the sacrifice ratio shown a significant and
negative effects. This means that increase in
minimum wage will decrease unemployment
sacrifice ratio. These results accordance with
the initial hypothesis which states that
7
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EISSN: 2309-8414
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minimum wage negatively impact directly
and significantly to the sacrifice ratio
unemployment. Moreover, this result is also
accordance with the theory of Blinder and
Rudd (2008) which states that minimum wage
is negatively correlated with the sacrifice
ratio.
The direct effect of minimum wage on
the manufacturing productivity showed a
significant and positive effect. This means
that increase in minimum wage will increase
manufacturing productivity. These results
consistent with the theory of Suyanto (2012)
which states that minimum wage is positively
correlated
with
the
manufacturing
productivity.
The direct effect of minimum wage on
the trade opennes shown a significant and
positive effect. This means that increase in
minimum wage will increase the trade
opennes. These result inconsistent with the
theory of Erceg, Gust and Lopez-Salido
(2007) which states that minimum wage is
negatively correlated with the trade opennes.
The direct effect of minimum wage on
the economic growth showed a significant
and positive effect. This means that increase
in minimum wage will increase economic
growth. These result consistent with the
theory of Chamberlin and Yueh (2006) which
states that minimum wage is positively
correlated with the economic growth.
The direct effect of minimum wage on
the educated unemployment shown a
significant and positive effect. This means
that increase in minimum wage will increase
the educated unemployment. These result is
not consistent with the theory of Elwin (2004)
which states that minimum wage is negatively
correlated with the educated unemployment.
The direct effect of property price index
on the sacrifice ratio shown a significant and
negative effects. This means that increase in
property price index will decrease
unemployment sacrifice ratio. These results
accordance with the initial hypothesis which
states that property price index negatively
impact directly and significantly to the
sacrifice ratio unemployment. Moreover, this
result is also accordance with the theory of
Charles, Hurst and Notowidigdo (2012)
which states that property price index is
negatively correlated with the sacrifice ratio.
The direct effect of property price index
on the manufacturing productivity showed a
significant and negative effect. This means
that increase in property price index will
decrease manufacturing productivity. These
results consistent with the theory of Charles,
Hurst and Notowidigdo (2012) which states
that property price index is negatively
correlated
with
the
manufacturing
productivity.
The direct effect of property price index
on the trade opennes shown a significant and
negative effect. This means that increase in
property price index will decrease the trade
opennes. These result inconsistent with the
theory of Cintado, Avila and Usabiaga (2014)
which states that property price index is
positively correlated with the trade opennes.
The direct effect of property price index
on the economic growth showed a
insignificant effect. This means that change in
minimum wage will not affect economic
growth. These result inconsistent with the
theory of European Union et al. (2013) which
states that property price index is positively
correlated with the economic growth.
The direct effect of property price index
on the educated unemployment shown a
significant and negative effect. This means
that increase in property price index will
decrease the educated unemployment. These
result consistent with the theory of Charles,
Hurst and Notowidigdo (2012) which states
that property price index is negatively
correlated with the educated unemployment.
The direct effect of manufacturing
productivity on the sacrifice ratio shown a
significant and positive effects. This means
that increase in manufacturing productivity
8
Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
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ISSN:1991-8178
EISSN: 2309-8414
Journal home page: www.ajbasweb.com
will increase unemployment sacrifice ratio.
These results is not accordance with the initial
hypothesis which states that manufacturing
productivity negatively impact directly and
significantly
to
the
sacrifice
ratio
unemployment. Moreover, this result is also
not accordance with the theory of Kula and
Aslan (2014) which states that manufacturing
productivity is negatively correlated with the
sacrifice ratio.
The direct effect of manufacturing
productivity on the trade opennes shown a
significant and positive effect. This means
that increase in manufacturing productivity
will increase the trade opennes. These result
consistent with the theory of Erceg, Gust and
Lopez-Salido (2007) which states that
manufacturing productivity is positively
correlated with the trade opennes.
The direct effect of manufacturing
productivity on the economic growth showed
a insignificant effect. This means that change
in manufacturing productivity will not affect
economic growth. These result inconsistent
with the theory of Slacalek (2005) which
states that manufacturing productivity is
positively correlated with the economic
growth.
The direct effect of manufacturing
productivity on the educated unemployment
shown a insignificant effect. This means that
change in manufacturing productivity will not
affect the educated unemployment. These
result inconsistent with the theory of Suyanto
(2012) which states that manufacturing
productivity is negatively correlated with the
educated unemployment.
The direct effect of trade opennes on
the sacrifice ratio shown a significant and
negative effects. This means that increase in
trade opennes will decrease unemployment
sacrifice ratio. These results is accordance
with the initial hypothesis which states that
trade opennes negatively impact directly and
significantly
to
the
sacrifice
ratio
unemployment. Moreover, this result is also
accordance with the theory of Cintado, Avila
and Usabiaga (2014) which states that trade
opennes is negatively correlated with the
sacrifice ratio.
The direct effect of trade opennes on
the economic growth showed a insignificant
effect. This means that change in trade
opennes will not affect economic growth.
These result inconsistent with the theory of
Yanikkaya (2003) which states that trade
opennes is positively correlated with the
economic growth.
The direct effect of trade opennes on
the educated unemployment shown a
significant and negative effect. This means
that increase in trade opennes will decrease
the educated unemployment. These result
consistent with the theory of Kabadayi (2013)
which states that trade opennes is negatively
correlated with the educated unemployment.
The direct effect of economic growth
on the sacrifice ratio shown a insignificant
effects. This means that change in economic
growth will not affect unemployment sacrifice
ratio. These results is not accordance with the
initial hypothesis which states that economic
growth negatively impact directly and
significantly
to
the
sacrifice
ratio
unemployment. Moreover, this result is also
not accordance with the theory of Okun
(1982) which states that economic growth is
negatively correlated with the sacrifice ratio.
The direct effect of economic growth
on the educated unemployment shown a
insignificant effect. This means that change in
economic growth will not affect the educated
unemployment. These result inconsistent with
the theory of Sudarwan (2004) which states
that economic growth is negatively correlated
with the educated unemployment.
6. CONCLUSION
The conclusion of the research as
follows:
1. Government spending policy has not been
effective in reducing the sacrifice ratio and
9
Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
SCIENCES
ISSN:1991-8178
EISSN: 2309-8414
Journal home page: www.ajbasweb.com
boost economic growth in Indonesia.
However, government spending policies
still need to be encouraged to remember its
role
in
improving
manufacturing
productivity.
2. Policies expenditures on education and
health has not been effective in reducing the
sacrifice ratio and boost economic growth
in Indonesia. Besides the role of education
and health spending in improving
manufacturing productivity also needs to be
reexamined. Similarly, the role of the
absorption of skilled manpower. However,
spending on education and health policies
still need to be encouraged in view of its
role in improving trade opennes.
3. The central bank's policy in the form of
credit disbursement is very effective in
stimulating the real sector in Indonesia and
was instrumental in reducing the sacrifice
ratio.
4. The minimum wage policy is also very
effective in reducing the sacrifice ratio and
also serve to encourage the real sector in
Indonesia.
5. The price stabilization policy also
successfully reduce the sacrifice ratio in
Indonesia. However the role of this policy
still needs to be improved, particularly in
boosting the real sector.
6. The role of the manufacturing sector in
reducing the sacrifice ratio is still low.
Similarly, the role of the real sector in
Indonesia.
7. The international trade have a positive
impact on workers in Indonesia, particularly
of skilled manpower. However, the role of
international trade on the domestic
economy is still low.
8. Economic growth in Indonesia has not been
qualified. Proven with no effect to
employment.
7. ACKNOWLEDGEMENTS
Thanks addressed to the promoter team
Prof. Dr. I Made Benyamin, M.Ec; Marsuki,
DEA, Ph. D.; and Dr Sanusi Fattah, M.Si,
lecturer of Economic Department, Economic
and Business Faculty, Hasanuddin University,
who have guided the authors in completing
this article.
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