The Relationship Between Economic Growth, FDI, Trade, Labor, and Capital Formation in Indonesia

DOI

10.2991/miceb-17.2018.9How to use a DOI?

Keywords

economic growth, FDI, trade, labor, capital formation

Abstract

This paper aims to examine the relationship between foreign direct investment, trade, labor, capital formation and economic growth in Indonesia. The study is conducted by establishing annual time series data covering period of 1985-2015 and examine using autoregressive distributed lag (ARDL). The ARDL bound test approach for cointegration reveal that there are three proposed models of cointegration among variables specifically when direct investment, trade, and capital formation as dependent variables. The long-run test associated with the cointegration model confirming at least two variables are significantly affect the dependent variable in each cointegration model. The result of error correction term indicates that there is uniformity of convergence towards the equilibrium point in the long-run term for all three models. Labor confirmed as the important indicators to attract foreign direct investment and to improve production scales for trade activities. The study also found that foreign direct investment is the main contributor in capital formation injection. The study suggests that the policy and government efforts to build competent human capital as preparation for future generation is widely believe a wise option. Investors pro-policy and liberalization should be promoting continuously to open more gate for new investors in establishing business in Indonesia. Simultaneously, the technological spill over derive from FDI can be absorb and adopt by the local labor force.

Copyright

© 2018, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Amelia Budiharto
AU  - Mr Suyanto
AU  - Hery Pratono Aluisius
PY  - 2017/10
DA  - 2017/10
TI  - The Relationship Between Economic Growth, FDI, Trade, Labor, and Capital Formation in Indonesia
BT  - Proceedings of the Mulawarman International Conference on Economics and Business (MICEB 2017)
PB  - Atlantis Press
SP  - 55
EP  - 63
SN  - 2352-5428
UR  - https://doi.org/10.2991/miceb-17.2018.9
DO  - 10.2991/miceb-17.2018.9
ID  - Budiharto2017/10
ER  -