Analysis Of The Influence Of Investment And Good Governance On The Open Unemployment Rate And Economic Growth In 34 Provinces In Indonesia

Abstract

The Sustainable Development Goals (SDGs) have become one of the main concerns and objectives to be achieved by the government by 2030, one of which is the eighth goal of decent work and economic growth, represented by the open unemployment rate and economic growth. As a target to be achieved by 2030, the open unemployment rate and economic growth in the period of 2016-2021 have not shown significant improvements, despite being supported by increased investment realization and improved government governance each year. The aim of this research is to analyze the influence of investment and good governance on the open unemployment rate and economic growth. The research was conducted in 34 provinces in Indonesia, using data from the period of 2016-2021. The type of data used in this study is secondary data collected through intermediaries or obtained and recorded by others. The analysis method used is simultaneous panel data analysis with Two Stage Least Squares (2SLS). The results of this research indicate that foreign direct investment and Indonesia's democracy index do not have an effect on the open unemployment rate, while capital expenditure has a significant negative effect on the open unemployment rate. On the other hand, domestic investment and Indonesia's democracy index do not have a significant effect, but the Human Development Index has a significant negative effect on economic growth. Economic growth has a significant negative effect on the open unemployment rate, and conversely, the open unemployment rate has a significant negative effect on economic growth. The implications of this research are that the government needs to create policies or guidelines to direct both foreign and domestic investment and the use of capital expenditure towards sectors that can generate employment and create a multiplier effect. It should also encourage local governments to maximize and improve their bureaucratic role, so that the impact will be felt by the community, such as implementing various training programs, job creation, or business mentoring, to ensure that the increase in economic growth is accompanied by an improvement in the quality of life for the people in terms of income, health, and education, thereby reducing the open unemployment rate.

Keywords: Unemployment Rate, Growth Rate, Foreign Direct Investment, Domestic Direct Investment, Indonesia Democracy Indeks, Human Development Indeks, Capital Expenditure, Two Stage Least Squares (2SLS).