Determinants of industrial agglomeration :: The case study of Indonesian manufacturing industry, 1994-2005
HARYANTO, Prof. Yoshi Takahashi
2008 | Tesis | S2 Magister Ekonomika Pembangunan-
It has long been recognized that economic activity is unevenly distributed among countries and regions. Some countries and regions seem more developed while the others remain under developed. Industries which tend to concentrate in certain regions and countries have caused those countries to industrialize earlier than others. This phenomenon has generated considerable interest among economists. Therefore, this study intends to explore the decisive factors that generate industrial agglomeration. This paper investigates the effect of competing theories which are Neo-classical Theory (NCT), New Trade Theory (NTT), and New Economic Geography (NEG). The first emphasizes endowment factors as the driving force of industrial agglomeration, while the latter two theories predict that market factor as the main determinant of industrial agglomeration. In addition to that, NEG also stresses the importance of vertical linkages among industries, in forcing the industrial ii agglomeration. Furthermore, this paper identifies which theory is more accurate in explaining the location pattern of Indonesian manufacturing industry in the analysis. The regression analysis was utilized to explain the relationship between explanatory variables which are related to each theory (NCT, NTT and NEG) and dependent variable (concentration index). The results of the study suggested that labor market pooling, wage rate, and firm size play a significant role as the driving force of industrial agglomeration. In contrast, market potential as well as vertical linkages effect cannot explain the variation of industrial agglomeration. Moreover, this study does not find empirically the effect of crisis that hit the Asian economy to the industrial agglomeration. In essence, this research concludes that the Neo-classical Theory is more relevant in explaining the location of Indonesian manufacturing industries. Even though the New Trade Theory also plays a role as its related determinant, average firm age is significant to some extent. Lastly, this study does not find the significance of the New Economic Geography in determining the industrial agglomeration
Kata Kunci : Penentuan industri, Industry manufaktur.
