The Influence of Total Factor Productivity towards the Economic Growth of Indonesia

Abstract

Economic growth is one of the major keys in the development of a country. This research aims to analyze the effect of capital accumulation growth, the regional minimum wages, and total factor productivity growth against Indonesia's economic growth. The analysis in this study uses the equation by the method of Error Correction Model (ECM). This study analyzed the relationship between the independent variable and the dependent variable, both in the short-term and long-term. Estimation results show that in the short-term both the variable capital accumulation, the regional minimum wage and total factor productivity growth affect Indonesia's economic growth but in the long-term, there are two variables that influence positive and insignificant i.e. investment, the Regional Minimum wage affects economic growth in Indonesia. And Total Factor Productivity growth in the long-term have a positive and significant influence on economic growth in Indonesia. Thus, it can be concluded that Total Factor Productivity is the main determining factor affecting economic growth in Indonesia.

Keywords

• economic growth
• capital accumulation
• wage
• productivity growth