•  
  •  
 
Jurnal Kebijakan Ekonomi

Abstract

Population density and average city’s wages in Java are higher than outside Java. The literature shows that population density can increase the productivity of firms and workers, thereby increasing the level of wages in cities. In urban economics, agglomeration economies are defined as the benefits that come when firms and people locate near one another together in cities and industrial clusters. This study estimates the agglomeration effect in Java and outside Java cities by analyzing the relationship between population density and urban characteristics with wage levels. Previous studies have shown that population density is positively correlated to wage levels at the city level. However, wage analysis at the city level has the potential to be biased because instead of reflecting the agglomeration effect, the high level of wages in cities may be due to the large proportion of highly skilled workers. This study analyzes wages at the micro-level by including individual characteristics documented in the 2019 National Labor Force Survey to overcome the bias problem. The estimation method used in this study is Ordinary Least Square (OLS) with empirical specifications adopting the model of Combes et al. (2010), and the Two-Stage Least Square (2SLS) estimation method is used with population density data in the past as an instrumental variable to overcome the endogeneity problem. This study found that population density is positively correlated with the city's wage level. However, the correlation is reduced by almost half when individual characteristics are included in the model, proving that the proportion of highly skilled workers strongly influences the high level of wages in the city.

Bahasa Abstract

Kepadatan penduduk dan rata-rata upah pada kota di Pulau Jawa lebih tinggi dibandingkan di luar Pulau Jawa. Literatur menyebutkan bahwa kepadatan penduduk dapat meningkatkan produktivitas perusahaan dan tenaga kerja sehingga mendorong tingkat upah di kota. Dalam studi ekonomi perkotaan, aglomerasi ekonomi didefinisikan sebagai manfaat yang tercipta saat perusahaan dan individu berdekatan satu sama lain dalam sebuah klaster industri atau pada sebuah kota. Penelitian ini mengestimasi efek aglomerasi pada kota di Pulau Jawa dan luar Pulau Jawa dengan cara menganalisis hubungan kepadatan penduduk dan karakteristik kota dengan tingkat upah. Studi terdahulu membuktikan bahwa kepadatan penduduk berhubungan positif dengan tingkat upah pada level kota. Namun, analisis upah pada level kota memiliki potensi bias karena alih-alih mencerminkan efek aglomerasi, tingginya tingkat upah di kota dapat disebabkan karena besarnya proporsi tenaga kerja berketerampilan tinggi. Untuk mengatasi permasalahan tersebut, penelitian ini menganalisis upah pada level mikro dengan menyertakan karakteristik individu yang terdokumentasi pada Survei Angkatan Kerja Nasional Tahun 2019. Metode estimasi yang digunakan dalam penelitian ini adalah Ordinary Least Square (OLS) dengan spesifikasi empiris mengadopsi model Combes et al. (2010), dan untuk mengatasi permasalahan endogeneity digunakan metode estimasi Two Stage Least Square (2SLS) dengan data kepadatan penduduk di masa lalu sebagai instrumental variable. Penelitian ini menemukan bahwa kepadatan penduduk berkorelasi positif dengan tingkat upah kota. Namun, korelasi tersebut berkurang hampir separuhnya saat karakteristik individu disertakan ke dalam model. Hal tersebut membuktikan bahwa tingginya tingkat upah di kota sangat dipengaruhi oleh proporsi tenaga kerja berketerampilan tinggi.

References

Abdel-Rahman, H., & Fujita, M. (1990). Product Variety, Marshallian Externalities, and City Sizes. Journal of Regional Science, 30(2), 165–183.

Alcal, F., & Ciccone, A. (2004). Trade and Productivity. The Quarterly Journal of Economics, 119(2), 613–646.

Arrow, K. J. (1962). The Economic Implications of Learning by Doing. 29(3), 155–173.

Berliant, M., Reed, R. R., & Wang, P. (2006). Knowledge exchange, matching, and agglomeration. Journal of Urban Economics, 60(1), 69–95.

Buchanan, J. M. (1965). An Economic Theory of Clubs. Economica, 32(125), 1–14.

Chamberlin, E. (1965). The Theory of Monopolistic Competition: a Re-Orientation of the Theory of Value. Harvard University Press.

Chauvin, J. P., Glaeser, E., Ma, Y., & Tobio, K. (2017). What is different about urbanization in rich and poor countries? Cities in Brazil, China, India and the United States. Journal of Urban Economics, 98, 17–49.

Ciccone, A., & Hall, R. E. (1996). Productivity and the Density of Economic Activity. American Economic Review, 86(1), 54–70.

Clark, C. (1945). The Economic Functions of a City in Relation to Its Size. Econometrica, 13(2), 97–113.

Combes, P.-P., Duranton, G., & Gobillon, L. (2010). The Identification of Agglomeration Economies. Halshs-00535593.

Combes, P., Duranton, G., Gobilon, G., Puga, D., & Roux, S. (2012). The Productivity Advantages of Large Cities: Distinguishing Agglomeration From Firm Selection. Econometrica, 80(6), 2543–2594.

Duranton, G. (2015a). Growing through cities in developing countries. World Bank Research Observer, 30(1), 39–73.

Duranton, G. (2015b). Roads and trade in Colombia. Economics of Transportation, 4(1–2), 16–36.

Duranton, G. (2016). Agglomeration effects in Colombia. Journal of Regional Science, 56(2), 210–238.

Duranton, G., & Puga, D. (2003). Micro-Foundations of Urban Agglomeration Economies. NBER Working Paper.

Duranton, G., & Puga, D. (2005). From sectoral to functional urban specialisation. Journal of Urban Economics, 57(2), 343–370.

Ellison, G., Glaeser, E. L., & Kerr, W. R. (2010). What causes industry agglomeration? Evidence from coagglomeration patterns. American Economic Review, 100(3), 1195–1213.

Firman, T. (2003). The spatial pattern of population growth in Java , 1990-2000. International Development Planning Review, 25(1), 53–66.

Fisher, A. G. B. (1939). Production, Primary, Secondary and Tertiary. Economic Record, 15(1), 24–38.

Florida, R., Mellander, C., & Holgersson, T. (2015). Up in the air: the role of airports for regional economic development. Annals of Regional Science, 54(1), 197–214.

Gerritse, M., & Arribas-Bel, D. (2018). Concrete agglomeration benefits: do roads improve urban connections or just attract more people? Regional Studies, 52(8), 1134–1149.

Glaeser, E., & Henderson, J. V. (2017). Urban economics for the developing World: An introduction. Journal of Urban Economics, 98, 1–5.

Glaeser, E. L. (2010). Introduction. In Agglomeration Economics (Issue February, pp. 1–14).

Glaeser, E. L., & Maré, D. C. (2001). Learning in Cities. Journal of Labor Economics, 19(2), 254–277.

Henderson, J. V., Nigmatulina, D., & Kriticos, S. (2019). Measuring urban economic density. Journal of Urban Economics, July 2018.

Jacobs, J. (1969). The Economies of Cities. Random House.

Marshall, A. (1920). Principles of Economics. In Plagrave Classics.

Moretti, E. (2004a). Estimating the social return to higher education: Evidence from longitudinal and repeated cross-sectional data. Journal of Econometrics, 121(1–2), 175–212.

Moretti, E. (2004b). Human Captial Externalities in Cities. Handbook of Regional and Urban Economics, 4(1), 2243–2291.

Overman, H. G., & Puga, D. (2010). Labor Pooling as a Source of Agglomeration: An Empirical Investigation. In Agglomeration Economics (pp. 133–150).

Rauch, J. E. (1993). Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities. In Journal of Urban Economics (Vol. 34, Issue 3, pp. 380–400).

Romer, P. M. (1986). Increasing Returns and Long-Run Growth. Journal of Political Economy, 94(5), 1002–1037.

Rosenthal, S. S., & Strange, W. C. (2003). Geography, Industrial Organization, and Agglomeration. The Review of Economics and Statistics, 85(2), 377–393.

Rosenthal, S. S., & Strange, W. C. (2004). Evidence on the nature and sources of agglomeration economies. In Handbook of Regional and Urban Economics (Vol. 4, Issue 04, pp. 2119–2171).

Tadjoeddin, M. Z., & Mercer-Blackman, V. (2018). Urbanization and Labor Productivity in Indonesia. In Indonesia. Enhanching Productivity Through Quality of Jobs (pp. 130–169).

Venables, A. J. (2011). Productivity in cities: Self-selection and sorting. Journal of Economic Geography, 11(2), 241–251.

White, B. (1973). Demand for Labor and Population Growth in Colonial Java. Human Ecology, 1(3), 217–236.

Yudhistira, M. H., & Sofiyandi, Y. (2018). Seaport status, port access, and regional economic development in Indonesia. Maritime Economics and Logistics, 20(4), 549–568.

Zong, J., Lin, Z., Guo, M., & Zhou, L. (2020). Urban agglomeration and job search behavior: evidence from China. Journal of the Asia Pacific Economy, 25(2), 307–325.

Download

Share

COinS