Economics – Population Growth Indonesia Essay

Population Growth Indonesia

This paper examines correlativity between population growing and economic growing in Indonesia by adding lagged birthrate and net-migrants as possible explanatory variables. In this manner, we differentiate the short tally and long tally effects of population growing on economic growing. Since extended migration policies have been taken countrywide in Indonesia, we hypothesize that adding net migrators in the arrested development as a new control could significantly impact the correlativity between the two variables. The consequences suggest that lagged birthrate does non impact the two-variable analysis. Once net-migrants are incorporated into a arrested development theoretical account, we obtain the significance of negative correlativity between population growing and economic growing. The consequences non merely back up both Malthusian and Non-Malthusian schools of idea but besides suggest that net migrators are cardinal determiners to be controlled to analyse economic growing in Indonesia.

Chapter 1: Introduction

This paper attempts to analyze correlativity between population growing and economic growing in Indonesia. More than one century the relationship between population growing and economic growing has been debated. On this issue, it is good known that there are chiefly two schools of idea: ( I ) Malthusian and ( two ) Non Malthusian ( Boserupian ) schools. The claim of Malthusian is that population additions at a geometric rate, whereas the food-supply grows at an arithmetic rate. Therefore, the Malthusian school concludes that population growing has inauspicious effects on economic growing overall.

Non Malthusian school ( Boserupian ) asserts that population may hold a scale consequence that is positive for economic growing. In peculiar, Boserup ( 1981 ) surveies the long-run interrelatedness between demographic tendencies and technological development, and concludes that technological invention and diffusion respond well to demand-pulls generated by population growing. Boserup farther insists that population growing is non a bad thing or even considered benefit to society. Following his statement, several surveies besides suggest that population growing stimulates the growing of economic system ( Mokyr, 1982 ; Cavin, 1984 ) .

Although many times in arguments, there is small systematic research about the impact of population growing on economic growing. The negative correlativity between population growing and economic growing could keep when the growing in entire end product is unaffected by the growing of population. In this instance, a rise in the rate of population growing would imply a corresponding decrease in the growing of end product per capita. The scientific community by and large accepts the speculation that population growing hinders economic development. Several past surveies besides find this negative relationship between the two variables, such as Hazledine and Moreland ( 1977 ) , Jackman ( 1982 ) , McNicoll ( 1984 ) , Coale ( 1986 ) , Bloom and Freeman ( 1988 ) , Kelley and Schmidt ( 1994, 1995 ) , and Barlow ( 1994 ) .

In the other subdivision of consequences, several empirical analyses, such as Easterlin ( 1967 ) , Kuznet ( 1967 ) , Simon and Gobin ( 1980 ) , Bairoch ( 1981 ) , Firebaugh ( 1983 ) and Simon ( 1989 ) , find no correlativity or even a positive 1. In other words, a negative causal consequence of population growing on economic growing is non identified statistically. One of the distinguishable plant is Crenshaw, Ameen and Christenson ( 1997 ) that survey 75 developing states, and analyzed the one-year mean per centum alteration in existent gross domestic merchandise per capita from 1965 to 1990 on demographic theoretical accounts. They find that an addition in the kid population hinders economic advancement, while an addition in the grownup population Fosters economic development.

The most influential work in this vena of research is Simon ( 1989 ) , which provides the logic of why many surveies yield different decisions on relationship between population growing and economic growing. He claims that most of past plants do non mention to the really long tally, but instead normally cover merely a one-fourth of century or a century at most. He farther argues that shorter term effects upon the criterion of life operate chiefly through capital dilution that includes the public costs of raising kids and the costs of supplying production capital for the extra individuals in the work topographic point. He besides claims that the most of import positive effects of extra people can be realized merely in the long tally through betterment of productiveness, the part of new thoughts and the acquisition by making ensuing from increased production volume.

Simon references that absence of correlativity between two variables can normally be considered a strong indicant that neither variable is act uponing the other, in other word, that slower population growing does non do faster economic development. More specifically, his statement is as follows:The lone persuasive statement against such a decision as a plausible scenario in which one or more specified variables that have been omitted from the analysis would, if included, take to a negative partial relationship between population growing and economic development. The variables must be named by the critic, and they must look sensible.

Barlow ( 1994 ) responds to Simon’s challenge by utilizing lagged birthrate as one omitted variable for his research. This variable is added to the current population growing as a forecaster of current per capita income growing, because this enables us to extricate short tally and long tally effects of population growing, which otherwise become baffled statistically. He argues that in the short tally, an addition in birthrate tends to hold negative effects on per capita income growing and in the long tally, its partial effects tend to be positive due to an addition in labour force or other causes. Since current birthrate is extremely correlated with past birthrate, current population growing rates include both the short tally negative and the long tally positive effects without commanding lagged birthrate.

Using the information of 86 states, he finds that if lagged birthrate is now added to the current rate of population growing, the correlativity between current economic growing and current population growing becomes significantly negative, while a simple two variables model without lagged birthrate exhibits no correlativity or even positive one. In his paper, a lagged birthrate variable is operationally defined as the net birthrate rate averaged over the six twelvemonth period get downing 17 old ages before the start of the period over which economic growing is measured. His arrested development consequence is considered outstanding since it is the first empirical research that demonstrates, without commanding lagged birthrate in the arrested development, current population growing appears to hold a zero impact on current per capita income growing, even when it truly has a negative short tally consequence.

In this paper, we extend Barlow’s analysis to analyze the impact of population growing on economic growing in Indonesia. We consider net-migrants as a new independent variable by pulling on provincial degree informations in Indonesia. Since extended migration policies have been taken countrywide in Indonesia, we hypothesize that adding net migrators in the arrested development non merely significantly affect the correlativity between the two variables, but besides partly capture the long tally positive consequence of population growing on economic growing. Furthermore, of our peculiar involvement is whether our consequence is consistent with the Barlow’s analysis of cross-country informations.

Indonesian people have traditionally been in changeless motion over clip. Migration within and across the parts or states has been both voluntary and nonvoluntary. Through transmigration policy implemented by the authorities, many Indonesian households who resided in the dumbly settled parts were resettled to lower population denseness parts ( Rogers et. al. , 2007 ) . Since 1950, transmigration policy has moved 6,271,240 peoples from 1,223,892 households. Migration contributes to demographic alteration in Indonesia associating to the separate people from one state to others state that influences economic development in their old part and their new part. Because of its important function in population alteration, we freshly add net-migrants to population growing as a forecaster of economic growing.

The consequences suggest that lagged birthrate does non impact the two-variable analysis. Once net-migrants are incorporated into a arrested development theoretical account, we obtain the significance of negative correlativity between population growing and economic growing. The consequences non merely back up both Malthusian and Non-Malthusian schools of idea but besides suggest that net migrators are cardinal determiners to be controlled to analyse economic growing in Indonesia. Furthermore, these consequences give answer to Simon’s invitation. Here, net-migrants are the variable which Simon mentioned to do relationship between population growing and economic going negative significantly. Overall, we could state that our consequences are consistent with Barlow’s claim.

This paper is organized as follow: Chapter 1 is Introduction. Chapter 2 discusses economic growing, population growing, birthrate and migration in Indonesia. Chapter 3 nowadayss methodological analysis and consequences, that contains theoretical account, informations description and arrested development consequence of correlativity among economic growing, population growing, lagged birthrate and migration in Indonesia. The last chapter is Chapter 4 that it is decisions and recommendations.

Chapter 2: ECONOMIC AND POPULATION OF INDONESIA

Population in Indonesia is estimated to be more than 218 million ( 2005 ) , and it is the world’s fourth-most thickly settled state. With 124 million people, the Java Island becomes one of the most dumbly populated countries in the universe or some 945 individuals per square kilometre. The most dumbly populated Outer Islands have 90 individuals or fewer per square kilometre. Indonesia experienced an impressive diminution in population growing 2.42 % in 1971-1980 to 1.98 % in 1981-1990. With such a diminishing tendency of population growing in the yesteryear, Indonesia has increased life criterions in footings of per capita gross domestic merchandise every bit good as societal public assistance around that decennary.

2.1. Economic Development

Indonesia terminated the first long term ( 25 old ages ) stage of development which started in 1969 and entered the 2nd, get downing in 1994. The first long term has exhibited an betterment in people’s public assistance to an extent that most of the basic demands for the bulk of people were satisfied. An addition in both per capita income and economic growing has contributed to important decrease in the figure people populating in poorness and an betterment of some basic societal indexs, such as in wellness, nutrition and instruction ( World Bank, 1990 ) .

Although Indonesia successfully improved the criterion of life in the yesteryear, there still exist 15 per centum of people that live in absolute poorness ; the disparity in the rate of economic growing among parts is acquiring perturbation for national economic growing ; the labour force is still turning at an dismaying rate, 2.3 million per twelvemonth. Thus at that place has remained a strong demand to better life criterions and the quality of instruction, wellness and nutrition. These challenges must be solved with accelerated sustainable economic growing based on the accomplishments in the long term development stage.

After retrieving from an unstable political and economic state of affairs in the early 1960s, Indonesia has maintained a high growing rate of about 7 % per annum until 1997. However, in the 1997-98 economic crises, Indonesia experienced the largest diminution in growing compared to neighbouring East Asiatic states. During 1998-2000, Indonesia besides fell behind other Asiatic states in retrieving from the economic crisis. This happening yields a set of new jobs, which are intense unemployment every bit good as high population denseness in this state.

Indonesia’s growing remains modest in 2003, but the economic system has performed better than expected. The twelvemonth of 2003 was marked by assorted external and internal menaces. Contrary to the guesss of many economic perceivers, the war in Aceh has so far non had a important impact on the Indonesian economic system ( Basri, 2003 ) . After economic crisis, Indonesia’s gross domestic merchandise ( GDP ) grew continuously. In 2005, GDP grew 4.9 per centum, while in 2003 grew 4.1 % , somewhat higher than 2002 ( 3.7 % ) ( Kuncoro and Reksosudarmo, 2006 ) .

Figure 1: Growth rate of Gross Domestic Product of Indonesia per twelvemonth, 1993-2005

2.2. Population of Indonesia

During 35 old ages population of Indonesia increased aggressively from 119,208,229 people in 1971 to 218,868,791 people in 2005 Such an addition in population becomes a serious job for people to maintain good life criterions, whereas it could be considered possible resource to increase production activity in the hereafter.

Although a alteration in human population could be characterized by many factors, such as birthrate, mortality, migration, public wellness, labour force and household planning, we focus on birthrate and migration to be 2nd sentiment in analysis on the relationship between population growing and economic growing in Indonesia. Given the empirical informations, population growing in state of Indonesia appears to be influenced by both birthrate and migration.

2.2.1. Birthrate

Indonesian authorities has household planning policy, which significantly contributed to cut downing birthrate. The birthrate rates have decreased by 40 % due to a combination of household planning and the usage of modern preventives, economic development and improved instruction for adult females. conceptual model for Indonesia’s birthrate decrease, 1950-1985.

The diminutions in birthrate, which reached replacing degrees in parts of Java, contribute to diminutions in the figure of hazardous births and gives better infant wellness. The part of the Indonesian household be aftering plan can be confirmed by looking at diminishing one-year population growing rates from 2.32 % in 1971-1980 to 1.97 % n 1980-1990.

We besides find that the cardinal factor in worsening Indonesia’s birthrate is the handiness of modern prophylactic methods.

Political orientation

Old order

Liberation/nationalism

“Revolution cull yesterday”

New Order

Pancasila rules

Socialization

Expansion of mass instruction

Higher instruction

New universe position

Mass communications: imperativeness, Television, wireless

Administration

Development-oriented bureaucratism

Strengthened perpendicular lines of authorization

Foreign assistance

Family

Couple-arranged matrimonies

Romantic matrimony

Liberation of kids: schools, reverseal of duties

Family Planing

Pill

Sterilization

Intrauterine device

Depo-Provera

NORPLANT

Logistic system

Economy

Green Revolution

Industrialization

Expansion of labour force

Rising economic system

Rise of in-between category

Expansion of public plants

Domestic and imported mass ingestion goods

Proximate variables

Increased prenuptial sex

Reduced postpartum abstention

Increased usage of birth control

Increased usage of abortion

Improved generative wellness of adult females

Fertility diminution

The Government by the National Family Planning Coordination Board has developed an efficient logistics system to supply a seamless supply of modern prophylactic methods to clinics and other points of distribution. A big proportion of Indonesia adult females of generative age have adopted utilizing of reversible prophylactic methods, such as the IUD, the pill and Norplant. This policy encouraged work forces to take more duty for birthrate control, and have spurred the usage of rubber.

2.2.2. Migration

Migration is defined as the figure of people traveling from one vicinity to another, sometimes over long distances or in big group. Interregional migration in Indonesia has been dominated by motion from the dumbly settled rural countries of Java to the outer island, such as Sumatra, Kalimantan and Sulawesi.

More than 60 percent people of Indonesia resided in Java and Bali that comprised 7 per centum of the nation’s land country. In 1990, more than 60 percent people of Indonesia resided in Java and Bali, two islands that comprise merely 7 per centum of the nation’s land country. The high population densenesss contrasted with the huge countries of the outer islands of Sumatra, Kalimantan, Sulawesi and Papua where population densenesss are significantly lower.

Indonesian Government implemented a policy to separate people from more population denseness to the less population denseness country. This policy is well-known as transmigration. Transmigration was initiated under Dutch colonial regulation during the early 20Thursdaycentury and taken over by the Indonesian Government. The major end of the transmigration plan in Indonesia was to excite regional development and create employment chances. The authorities fundss motion of landless people from the crowded inner islands of Java, Bali, Madura and Lombok to agricultural based colonies in the outer islands of Sumatra, Kalimantan, Sulawesi and Irian ( Papua ) where population densenesss are lower. It is now believed that this plan would relieve poorness and supply land, besides new chances to bring forth income for hapless landless colonists ( Arndt and Sundrum ( 1977 ) .

Transmigration in Indonesia encompasses three different groups. First,sponsored transmigrants group, that people receives extended support from the authorities during the initial five old ages of colony in the signifier of conveyance, land, lodging, and societal services. Second,local transmigrant groupthat people of this group which originate in or near the colony countries would be developed and receive the same benefits as the sponsored transmigrants. Third,self-generated transmigrants groupthat people move at their ain disbursal and settle in a site of their pick.

Another of import note in migration of Indonesia is that late Indonesia faces several struggles whose effects are realized in the grassroots population and collapsible shelters as internally displacement individuals. Since 1998 the moving of internally displacement people is already more than 1.3 million, from Kalimantan, Maluku, Sumatra, Papua and Nusatenggara. The roots of struggle based on part and mostly on the out of boundss, such as force between the bulk Muslims and minority Christian on eastern Maluku islands and Poso-Central Sulawesi, between local cultural and Maduras in East Kalimantan. Figure 5 shows Internally Displacement Persons Champs in Indonesia.

Conflict in Poso, Central Sulawesi left at lease 200 dead and an estimated 60,000 people displaced. In Aceh, the figure of individuals displaced by the struggle ebbed and flowed, but 10s of 1000 fled their places over the class of the twelvemonth. Thousands of non-Acehnese migrated to other state in Sumatra and Java, many after holding been threatened by Rebels. In July 2001, about 60,000 people from Central and West Kalimantan of the recent eruption of force lived in shocking in collapsible shelters and shelters in Pontianak, West Kalimantan ( Pudjiastuti, 2002 ) .

16

15

14

13

12

11

10

9

8

7

6

5

4

3

2

1

Chapter 3: Methodology AND RESULTS

We analyze correlativity between economic growing and population growing in Indonesia from 1993-2005 by utilizing ordinary leas square ( OLS ) . We start from Simon physique in his research. He notes Ronald Lee account which summarized correlativity between population growing and economic growing.

“Starting with Kuznets’ , have found no association between the population growing rate and per capita income growing rate, despite the obvious fact that at least since WWII, population growing rates have varied considerably… . over period every bit long as a century or every bit short as 25 old ages, there is no important association of ( the population growing rate and the rate of alteration of per capita income ) , for either DCs or LDCs …”( Reviewed by Simon, 1989 ; italics added ) .

Then, Julian Simon ( 1989 ) stated that population growing and economic growing would hold negative partial relationship if included one or more specified variables in the analysis. We use lagged birthrate and net-migrants to look into Simon’s statement.

The ground utilizing lagged birthrate in the analysis between population growing and economic growing is that it can distinguish short-term and long-term effects of population growing on economic growing. The statement is that in the short-run, an addition in lagged birthrate tends to hold negative effects on economic growing and in the long-term, tends to be positive effects. Current birthrate has high correlativity with past birthrate, therefore current population growing covers the short-term negative and the long-term positive effects. Therefore, we argue that in a two-variable analysis, correlativity between current population growing appear to hold a zero impact on current economic growing. The ground utilizing net-migrants in Indonesia’s survey is that migration is the mainstream policy in economic development which started in the early 1900s. Recently, employment coevals through investing in labour-intensive endeavors was given high precedence, and migration policy was a manner for occupation creative activity.

Here, economic growing is represented by mean one-year growing of existent Gross Domestic Product ( GDP ) in period 1993-1999 and 1999-2005. Population growing is mean one-year growing of population in period 1993-1999 and 1999-2005. Lagged birthrate is defined as the net birthrate rate averaged over the six-year period get downing 17 old ages before the start of the period over which economic growing. In this analysis if the economic growing period is 1993-1999, lagged birthrate is the mean net birthrate rate over the 1976-1982. The net birthrate rate is defined as the entire birthrate rate adjusted for infant mortality. Net-migrants growing is mean one-year growing of net-migrants in period 1993-1999 and 1999-2005. We use informations from Central Bureau Statistic of Indonesia ( hypertext transfer protocol: //www.bps.go.id ) and Data Statistik Indonesia ( hypertext transfer protocol: //www.datastatistik-Indonesia.com ) . The information consists 26 states in Indonesia composition of 2 period twelvemonth each state.

When we add lagged birthrate in the arrested development theoretical account, the correlativity between economic growing and population growing is non important This consequence is contradictive with Barlow’s probe by utilizing transverse state informations analysis. He found that adding lagged birthrate in two-variable analysis makes the coefficient on current population growing significantly negative.

Arrested development

coefficients on

independent

Dependant

Changeless

variables

variable

term

POPGR

LGFER

NETMIG

R-squared

1

ECGR

3.563***

-0.423

— —

— —

0.022

2

ECGR

4.241*

-0.373

-0.163

— —

0.024

3

ECGR

2.890

-1.003*

0.386

0.080**

0.105

4

NETMIG

-11.629***

5.751***

— — –

— — –

0.220

* = coefficient significantly different from nothing at 90 per centum assurance degree.

** = coefficient significantly different from nothing at 95 per centum assurance degree

*** = coefficient significantly different from nothing at 99 per centum assurance degree

Variable

Nitrogen

Mean

Standard Deviation

Minute

Soap

Annual Economic Growth

52

2.82

2.74

-5.22

11.75

Annual Population Growth

52

1.77

0.96

0.17

4.35

Lagged Birthrate

52

4.71

0.77

3.06

6.00

Annual Net Migrants Growth Rate

52

-1.47

12.21

-56.20

17.36

If net-migrants growing is added in the arrested development analysis, therefore we have three independency variables, the correlativity between current economic growing and current population growing becomes significantly negative. The arrested development equation is reported in Table 2 ( No. 3 ) . So, we know the ground why lagged birthrate by its ain doesn’t consequence on correlativity between population growing and economic growing. The ground is people who born in 17 old ages ago migrate to the other part and go employment in the new part.

In this analysis, the period of net-migrants growing is the same with population growing and economic growing. Net-migrants are defined as the difference between immigrants and emigres of an country in a period of clip. A positive value represents more people come ining the part than go forthing it, while a negative value means more people go forthing than come ining to the part. In the short tally, increasing net-migrants lead to a negative partial relationship between population growing and economic growing.

Economic growing is positively related to net-migrants growing, but negatively related to population growing. The positive consequence of current net-migrants growing on current economic growing could be made clear by the fact that higher growing rate of net-migrants induce higher growing rate of the labour force and ingestion. Migration will hold on domestic labour supply, although its economic effects will depend greatly on whether it is lasting or impermanent and on the nature of migratory remittals. ( Bloom and Freeman, 1986 ) .

The resulted that a higher growing rate of current population has a negative consequence on current economic growing could be explained by diminishing salvaging rate as a consequence of higher dependence load, the direct addition in the denominator of the gross domestic merchandise ( GDP ) ratio, and diminishing female labour force engagement rate. The negative correlativity besides can be explained by relationship among labour, salvaging and capital. Surplus labour is absorbed merely if salvaging and capital grow faster than population, or if technological alteration in fabricating beginnings the combined effects of decreasing returns in agribusiness and of population growing. The displacement of labour into fabrication occurs more quickly the slower the growing of population, therefore other things being equal ( Birdsall, 1989 ) .

It gives us the ground the zero impact rate of population growing on current economic growing in the two-variable theoretical account, while in four-variable theoretical account the impact is negative. In the two-variable theoretical account, the mean one-year population growing represents besides net-migrants growing, non merely itself.

In the instance of Indonesia, increasing growing rate of cyberspace migrators has positive impact on economic growing. This instance same with the positive impact of in-migration in United Kingdom which investigated by Coleman and Rowthorn ( 2004 ) . Large-scale in-migration in United Kingdom is to be indispensable for the economic wellbeing and beneficial for the society ; steps have been introduced to increase influxs. The benefits include financial advantages, increased gross domestic merchandise per caput, a ready supply of labour, and betterments to age construction.

No

State

Year

96

97

98

99

2000

2001

2002

2003

2004

2005

1

N Aceh Darussalam

4.5

5

1.5

-5.2

1.5

7.2

-11.1

8.3

-3.2

4.9

2

North Sumatra

2.5

1.4

2.9

1

5.4

-1.2

3.6

2

-1

5.3

3

West Sumatra

1.2

4

3.5

-1.2

-5.5

2.1

1.3

4.7

2.2

-3.1

4

Riau

5.2

5.4

4.6

-4.3

16.7

3.6

8.4

3.7

2.6

7

5

Jambi

5.5

0.2

6.8

2.9

-8.8

2.9

8.2

1.5

2.7

-0.8

6

South Sumatera

2.4

3.4

4.6

3.9

4.2

-9

1.25

3.5

1.85

0.85

7

Bengkulu

9.2

1.8

6.8

0

-6.5

2.6

10

3.1

-7

4.9

8

Lampung

6

-1.9

9.7

-1.5

0.3

0.5

3

1.6

0.6

-1.1

9

Djakarta

5.6

6

0

9.9

-12.5

3.2

-5.1

4

3.3

2

10

West Java

3.6

1

4.3

6

4.4

-12.3

3.8

-0.75

2.95

1

11

Cardinal Java

1.8

-0.1

3.4

2.3

5.2

-0.1

1.1

1.2

2.4

1

12

Yogyakarta

-1.8

3

-2.1

5.1

9.7

-1.1

0.9

3.4

1.3

2

13

East Java

0.8

1.1

3.9

1.8

-1

2.2

0.6

2.9

0.7

2.5

14

Bali

1

2.9

-0.6

4.2

5.3

0.2

0.4

2.2

1.4

5.3

15

West Nusa Tenggara

3.2

4.6

-3.4

3.2

4.7

1.8

8.3

4.7

-5.1

-1.7

16

East Nusa Tenggara

2.6

0.9

2.8

-1.9

9.7

1.6

-0.1

2.4

3.3

5.3

17

West Kalimantan

3.1

2.7

-0.2

1.3

7.6

-5.8

17.5

0.3

-5.9

2.6

18

Cardinal Kalimantan

8.9

4.3

-3

3.9

2.4

-1.1

8.8

2.7

-7

8.2

19

South Kalimantan

3.1

3.8

1

4.8

-4.9

-1.2

7.4

1.4

2.6

-3.2

20

East Kalimantan

7.9

0

12.4

-0.4

-3.2

-1.1

2.9

6.3

-4.9

5.9

21

North Sulawesi

2.3

0.4

-1.3

7.6

-6.5

-22

-4.5

4

6.4

3.5

22

Cardinal Sulawesi

4

5.1

2.9

3.8

2

-0.6

4.4

-4.5

1.2

-1.2

23

South Sulawesi

1.9

-1.1

6.9

1.6

-3.7

5.7

0.1

5.7

0.35

-2.65

24

Southeast Sulawesi

7.2

7.3

1.9

-1.4

9.3

6.8

0.6

7.9

-2

-3