THE ROLE OF LABOR IN MEDIATING THE EFFECT OF WAGES, INVESTMENT, EDUCATION AND HEALTH ON GROSS REGIONAL DOMESTIC PRODUCT IN INDONESIA
DOI:
10.54443/morfai.v6i1.4732Published:
2025-12-23Downloads
Abstract
Equitable and sustainable economic growth has become an important agenda in Indonesia’s development, especially through the strengthening of the Gross Regional Domestic Product (GRDP). Labor is a main production factor that is suspected to play a mediating role in channeling the influence of various economic determinants on regional performance. This study aims to analyze the role of labor (LFPR) in mediating the influence of wages, domestic investment (PMDN), education, and health on GRDP in 34 provinces in Indonesia during the 2014–2023 period. The analysis was carried out using panel data with a path analysis approach and mediation testing using the Sobel Test. The results of the study show that directly wages, education, health, and investment have a significant effect on GRDP, while the influence of these variables on LFPR shows variations in significance. Indirectly, only wages and education are proven to have a significant effect on GRDP through LFPR as a mediating variable, while investment and health do not show significant mediation effects. These findings emphasize that improving the quality and involvement of labor is an important channel in transmitting the economic impact of wage and education improvements, while the influence of investment and health works more dominantly through direct mechanisms on economic output. This study contributes to strengthening the literature on human-capital-based development and provides more directed policy guidance in encouraging inclusive and sustainable regional economic growth.
Keywords:
Labor Wages Investment GRDP MediationReferences
Kasidi, D. and Fitri, H. (2024). Spatial analysis of regency city minimum wage, labor force, regional original income and investment affecting gross regional domestic product in central java province in 2022. Jppi (Jurnal Penelitian Pendidikan Indonesia), 10(4), 358-373.
Prabowo, D., Maski, G., & Santoso, D. (2022). Fostering inclusive growth in indonesia: evidence from panel regression analysis. Journal of International Conference Proceedings, 5(2), 139-149.
Putra, I. and Mustika, M. (2025). Analysis of determinants of economic growth and poverty in districts/cities of bali province. International Journal of Multidisciplinary Research and Analysis, 08(07).
Rahmayani, R. (2024). Challenges and opportunities for labor absorption: case study in west java province through panel data approach. SSHS, 2(2), 113-120.
Satriawan, D., Muslim, I., & Fadliyanti, L. (2025). Determinasi kesempatan kerja di kabupaten lombok barat tahun 2009-2023. El-Mal Jurnal Kajian Ekonomi & Bisnis Islam, 6(8).
Ekeocha, D., Ogbuabor, J., Ekeocha, P., & Orji, A. (2023). Analysis of sectoral outcomes and institutional quality nexus in sub-saharan africa. Sage Open, 13(4).
Giombini, G., Grassetti, F., & Carrera, E. (2022). Economic growth, poverty traps and cycles: productive capacities versus inefficiencies. Journal of Economic Studies, 50(7), 1375-1398.
Li, P., Li, X., & Yuan, G. (2023). Cross-regional allocation of human capital and sustainable development of china’s regional economy—based on the perspective of population mobility. Sustainability, 15(12), 9807.
Puaschunder, J. (2020). Economic growth in times of pandemics. SSRN Electronic Journal.
Ramly, F., Rumerung, D., & Payapo, R. (2023). Effect of foreign direct investment (fdi) on economic growth and labor absorption in maluku. Enrichment Journal of Management, 13(1), 340-348.
Vikia, Y. (2023). The solow-swan theories: an empirical evidence in various indonesian provinces. Optimum Jurnal Ekonomi Dan Pembangunan, 13(2), 155-174.
Villanueva, D. (2021). Capital and growth. Bulletin of Monetary Economics and Banking, 24(2), 285-312.
Wang, C. (2024). Influence of structured human capital and psychological health on export quality: an empirical analysis of innovation capacity mediation across chinese regions.
Bahtia, J., Munawar, M., & Sakti, R. (2025). The influence of education level, unemployment rate, and health level on economic growth and poverty rate in indonesia from 2010 to 2023. Jurnal Indonesia Sosial Sains, 6(5).
Kusumawardhani, A. (2025). The role of human capital in regional economic growth: evidence from central java- indonesia. Niqosiya Journal of Economics and Business Research, 5(1), 11-25.
Nairobi, N. and Respitasari, R. (2021). Public infrastructure and economic growth in the local region. Jurnal Ekonomi Pembangunan, 19(1), 51-60.
Purba, S., Yulianti, A., Astana, S., Djaenudin, R., Hariyadi, H., Simandjorang, B., … & ISTRININGSIH, I. (2023). The contribution of agricultural crop production towards the economic growth of indonesia’s agricultural sector. E3s Web of Conferences, 444, 02034.
Qurniawan, R. and Jasmina, T. (2021). The effect of general and vocational high school quality on labor market outcomes in indonesia. The Journal of Indonesia Sustainable Development Planning, 2(3), 307-323.
Wicaksono, D., Nuriyah, S., Fajritia, R., Yuniarti, N., Priatmadani, P., Amelia, L., … & Berliana, S. (2024). Modeling factors affecting educated unemployment on java island using geographically weighted poisson regression model. Barekeng Jurnal Ilmu Matematika Dan Terapan, 18(1), 0615-0626.
Comola, M. and de Mello, L. (2011). How does decentralized minimum wage setting affect employment and informality? The case of Indonesia. Review of Income and Wealth, 57, S79-S99.
Fadhilah, F., Ananda, C. F., & Kaluge, D. (2024). A panel approach: How does the government expenditure influence human development index? Journal of Economics and Development Studies, 10(2), 130-139.
Fatimah, S. and Wiratmini, N. P. E. (2024). The influence of economic growth, investment, and minimum wage on unemployment in East Kalimantan districts. Global Economics: International Journal of Economic, Social and Development Sciences, 2(3), 1-15.
Haryanto, J. T. and Tenrini, R. H. (2022). Study of fiscal decentralization, macroeconomic stability and regional growth in Indonesia. Jurnal Perspektif Pembiayaan dan Pembangunan Daerah, 9(3), 201-216.
Purnastuti, L. and Suprayitno, B. (2016). Does human capital investment matter for growth? Evidence from Indonesia during the fiscal decentralization era. Regional Science Inquiry, 8(1), 39-49.
Sasongko, G., Huruta, B. E., & Huruta, A. D. (2020). Female labor force participation rate in Indonesia: An empirical evidence from panel data approach. Management and Economics Review, 5(1), 136-146.
Setyadi, A., Sulistyowati, E., & Nugroho, A. (2023). Life expectancy in Indonesia: The role of health infrastructure, political, and socioeconomic status. Iranian Economic Review, 27(3), 623-648.
Silaban, P. S. M. J., Tobing, W. R. L., & Sirait, R. T. M. (2024). FDI and economic growth in Indonesia: A provincial and sectoral analysis. Journal of Economic Structures, 13(1), 1-22.
Siregar, O. K., Dalimunthe, S., Parinduri, L., & Sudirman, A. (2020). The impact of GRDP and RWP on regional minimum wage. JEJAK: Jurnal Ekonomi dan Kebijakan, 13(2), 250-262.
Sulistiawati, R. (2012). Pengaruh investasi terhadap pertumbuhan ekonomi dan penyerapan tenaga kerja serta kesejahteraan masyarakat di provinsi di Indonesia. Jurnal Ekonomi Bisnis dan Kewirausahaan, 3(1), 29-50.
Suripto, S., Wibowo, M. G., & Santoso, B. (2021). Education and labor productivity in Indonesia: A panel data analysis. Jurnal Ekonomi Pembangunan, 20(2), 145-160.
License
Copyright (c) 2026 Aini Rahma, Sirojuzilam, M. Syafii
This work is licensed under a Creative Commons Attribution 4.0 International License.
Downloads
How to Cite
