Empirical Analysis of the Lewis Economic Dualistic Theory: The Case of Indonesia IPB University, International Center for Applied Finance and Economics (Inter CAFE).
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Accepted
12 June 2023
Published
16 July 2023
Keywords:
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Agriculture, Employment, Non-agriculture
Abstract
Indonesia’s economic development is marked by changes in the structure of the economy and employment from those originally based on agriculture to non-agriculture, which is called structural transformation. This study discusses the turning point phenomenon in employment which is one of the important theses in the dualistic economic development analysis framework formulated by Lewis (1954). Related to changes in the sectoral employment structure and the achievement of turning points, this study finds that Indonesia has not yet entered a turning point stage. The achievement of Lewis’s turning point in Indonesia tends to be temporary. Viewed from the decomposition of sectoral growth, the contribution of the non-agricultural sector to economic growth is two times greater than that of the agricultural sector. This shows that economic growth in Indonesia is strongly driven by the role of the non-agricultural sector. This study also found that layers of labor from the agricultural to non-agricultural sectors had a positive impact on economic growth in Indonesia.
References
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Bairagi, S., Kamal, M. (2019). Is Bangladesh’s Economy Approaching the Lewis Turning Point? South Asia Economic Journal, 20(1), 19– 45. https://doi.org/10.1177/1391561418822208
Basu, Kaushik (2000). Analytical Development Economics: The Less Developed Economy Revisited. Cambridge and London: MIT Press.
Bowonthumrongchai, T. (2019). Lewis Turning Point and Agricultural Development in the Mekong: A Case of Thailand. 社会科学論集= SHAKAIKAGAKU-RONSHU (The Social Science Review), 156, 31-49. https://cir.nii.ac.jp/crid/1390290699791365888
Cheng, S., Heng, D., Ngim, R., Ban, K. (2015). Has Cambodia reached the Lewis Turning point?: final draft.
Corsman, E. (2015). Has China passed its Lewis Turning Point?-A study of regional variation.
Dartanto, T., Yuan, E. Z. W., Sofiyandi, Y. (2017). Structural Transformation and the Dynamics of Income Equality in Indonesia: 1996-2014. Kuznets Beyond Kuznets. https://www.adb.org/publications/two-decades-structural-transformation-and-dynamics-income-equality-indonesia
Das, M. M., N'Diaye, M. P. M. (2013). Chronicle of a decline foretold: Has China reached the Lewis turning point?. International Monetary Fund. https://www.imf.org/external/pubs/ft/wp/2013/wp1326.pdf
Dastidar, A. (2012). Income distribution and structural transformation: Empirical evidence from developed and developing countries. Seoul Journal of Economics, 25(1), 25-56. https://ssrn.com/abstract=2020903
Fei, J. C., & Ranis, G. (1964). Development of the labor surplus economy; theory and policy.
Firmansyah, F., Sumarno. (2013). Perkembangan wajib belajar 9 tahun di Indonesia periode 1994-2008. AVATARA, e-Journal Pendidikan Sejarah, 1(2), hlm. 198-203. https://ejournal.unesa.ac.id/index.php/avatara/article/view/2387
Fuglie, K. O., Wang, S. L., Ball, V. E. (Eds.). (2012). Productivity growth in agriculture: an international perspective. CABI. http://dx.doi.org/10.1017/S0014479713000094
Gollin, D. (2014). The Lewis model: A 60-year retrospective. Journal of Economic Perspectives, 28(3), 71-88.
Hadiana, M. H., Daud, A. R., Utami, A. W. (2019). Analisis efisiensi penggunaan faktor-faktor produksi pada peternakan sapi perah (Survei pada peternak sapi perah, Kecamatan Pangalengan Jawa Barat). Jurnal Sosial Bisnis Peternakan, 1(1), 11-18. https://doi.org/10.24198/jsbp.v1i1.25489
Hubbansyah, A. K., Husodo, Z. A. (2018). The Interdependence Between the Financial Sector and Business Sector in ASEAN 4 Countries. Journal of Indonesian Economy and Business: JIEB., 33(1), 77-94. https://doi.org/10.22146/jieb.28659
Islam, R. (2014). The employment challenge faced by Bangladesh: How far is the Lewis turning point. The Indian Journal of Labour Economics, 57(2), 201-225.
Islam, R. (2015). Structural transformation and alternative pathways to the Lewis Turning Point. Paper prepared for the International Seminar on Labor and Employment Issues in the Emerging Rural-Urban Continuum: Dimensions, Processes and Policies, 12–14 March, Hyderabad, India. http://dx.doi.org/10.1007/978-981-10-5628-4_2
Juanda, B., Junaidi, J. (2012). Ekonometrika deret waktu: teori dan aplikasi.
Kuznets, S. (1955). Economic growth and income inequality. The American economic review, 45(1), 1-28. https://www.jstor.org/stable/1811581
Lewis, W. A. (1954). Economic development with unlimited supplies of labor. The Manchester School, 22(2), 139–191. https://doi.org/10.1111/j.1467-9957.1954.tb00021.x
Liu, S. (2019). Research on China’s “Lewis Turning Point” and Efficiency Analysis of Each Province—Based on DEA and SFA Methods. Modern Economy, 10(4), 1178-1189. https://doi.org/10.4236/me.2019.104080
Ma, X., & Minami, R. (2022). Dual Economic Structure, Surplus Labour and Rural-Urban Migration. In Growth Mechanisms and Sustainable Development of the Chinese Economy: Comparison with Japanese Experiences (pp. 249-277). Singapore: Springer Nature Singapore.
Mariyono, J., Kompas, T., Grafton, R. Q. (2010). Shifting from Green Revolution to environmentally sound policies: technological change in Indonesian rice agriculture. Journal of the Asia Pacific economy, 15(2), 128-147. http://dx.doi.org/10.1080/13547861003700109
McCaig, B., Pavcnik, N. (2018). Export markets and labor allocation in a low-income country. American Economic Review, 108(7), 1899-1941. https://econpapers.repec.org/article/aeaaecrev/v_3a108_3ay_3a2018_3ai_3a7_3ap_3a1899-1941.htm
Minami, R., Makino, F., Kim, K. (Eds.). (2014). Lewisian Turning Point in the Chinese Economy: Comparison with East Asian Countries. Springer.
Minami, Ryoshin. 1968. The turning point in the Japanese economy. Quarterly Journal of Economics 82, no. 3: 380–402. https://www.jstor.org/stable/i332282
Pingali, P. L. (1997). From subsistence to commercial production systems: The transformation of Asian agriculture. American journal of Agricultural economics, 79(2), 628-634. https://doi.org/10.2307/1244162
Ranis, G. (2012). Labor surplus revisited (Yale University Economic Growth Center Discussion Paper No.1016). New Haven, CT: Yale University. http://www.econ.yale.edu/growth_pdf/cdp1016.pdf
Ranis, G., & Fei, J. C. (1961). A theory of economic development. The American Economic Review, 51(4), 533–565. https://www.depfe.unam.mx/actividades/11/desarrollo-crecimiento/11-2_catcdejr_04_ranis_fei_1961.pdf
Rostow, W. W. (1956). The take-off into self-sustained growth. The Economic Journal, 66(261), 25-48. https://www.jstor.org/stable/i338949
Sen, K. (2019). What explains the job creating potential of industrialisation in the developing world?. The Journal of Development Studies, 55(7), 1565-1583. https://econpapers.repec.org/scripts/redir.pf?u=https%3A%2F%2Fdoi.org%2F10.1080%252F00220388.2017.1404033;h=repec:taf:jdevst:v:55:y:2019:i:7:p:1565-1583
Setiyanto, A. (2015). Analisis penyerapan tenaga kerja perdesaan lahan kering berbasis perkebunan. https://media.neliti.com/media/publications/735-ID-analisis-penyerapan-tenaga-kerja-perdesaan-lahan-kering-berbasis-perkebunan.pdf
Silaban, L. R., & Sugiharto, M. S. (2016). Usaha Usaha yang dilakukan Pemerintah dalam Pembangunan Sektor Pertanian. JPPUMA: Jurnal Ilmu Pemerintahan dan Sosial Politik UMA (Journal of Governance and Political Social UMA), 4(2), 196-210. https://doi.org/10.31289/jppuma.v4i2.458
Supriyati, S. (2010). Dinamika Ekonomi Ketenagakerjaan Pertanian: Permasalahan Dan Kebijakan Strategis Pengembangan. https://media.neliti.com/media/publications/53861-ID-dinamika-ekonomi-ketenagakerjaan-pertani.pdf
Susilo, Y. S., & Handoko, B. S. (2002). Dampak Krisis Ekonomi Terhadap Kinerja Sektor Industri: Pendekatan Model Keseimbangan Umum Terapan Indorani.Journal of Indonesian Economy and Business (JIEB), 17(3). https://media.neliti.com/media/publications/92025-ID-dampak-krisis-ekonomi-terhadap-kinerja-s.pdf
Wie, T. K. (2006). Technology and Indonesia's industrial competitiveness (No. 72). ADBI Research Paper Series. https://www.adb.org/sites/default/files/publication/156680/adbi-dp43.pdf
Wiggins, S. (2016). IFAD RESEARCH SERIES 1-Agricultural and rural development reconsidered: a guide to issues and debates. IFAD Research Series. https://ssrn.com/abstract=3284413
Winardi, W., Priyarsono, D. S., Siregar, H., & Kustanto, H. (2019). Peranan kawasan industri dalam mengatasi gejala deindustrialisasi. Jurnal Ekonomi dan Pembangunan Indonesia, 19(1), 5. https://scholarhub.ui.ac.id/cgi/viewcontent.cgi?article=1244&context=jepi
World Bank (1996) The Chinese Economy: Controlling Inflation, Deepening Reform, The World Bank Publication, Washington, D.C.
Yamada, T. (2016, September). The Turning Point in the Vietnamese Economy: Revisiting Labor Surplus Theory. In Forum of International Development Studies (Vol. 47, No. 5, pp. 1-15). http://dx.doi.org/10.18999/forids.47.5
Yusdja, Y., & Soeparno, H. (2011). Dampak krisis ekonomi terhadap pertanian di Indonesia. Konversi dan Fargmentasi Lahan Ancaman terhadap Kemandirian Pangan. Badan Penelitian dan Pengembangan Pangan, Kementrian Pertanian. Jakarta. http://digilib.ulm.ac.id/cabang/index.php?p=show_detail&id=29661
Zhang, X., Yang, J., & Wang, S. (2011). China has reached the Lewis turning point. China Economic Review, 22(4), 542-554. https://doi.org/10.1016/j.chieco.2011.07.002
Zhu, A., Cai, W. (2012). The Lewis turning point in China and its impacts on the world economy. AUGUR WorkingPaper, (1). http://ss.rrojasdatabank.info/chinalewis11.pdf
Aggarwal, R. (2021). Comparative Analysis of Structural Transformation Process of Selected Asian Developing Economies. Journal of Asian Economic Integration, 3(1), 7- 24. https://doi.org/10.1177/2631684621989809
Bairagi, S., Kamal, M. (2019). Is Bangladesh’s Economy Approaching the Lewis Turning Point? South Asia Economic Journal, 20(1), 19– 45. https://doi.org/10.1177/1391561418822208
Basu, Kaushik (2000). Analytical Development Economics: The Less Developed Economy Revisited. Cambridge and London: MIT Press.
Bowonthumrongchai, T. (2019). Lewis Turning Point and Agricultural Development in the Mekong: A Case of Thailand. 社会科学論集= SHAKAIKAGAKU-RONSHU (The Social Science Review), 156, 31-49. https://cir.nii.ac.jp/crid/1390290699791365888
Cheng, S., Heng, D., Ngim, R., Ban, K. (2015). Has Cambodia reached the Lewis Turning point?: final draft.
Corsman, E. (2015). Has China passed its Lewis Turning Point?-A study of regional variation.
Dartanto, T., Yuan, E. Z. W., Sofiyandi, Y. (2017). Structural Transformation and the Dynamics of Income Equality in Indonesia: 1996-2014. Kuznets Beyond Kuznets. https://www.adb.org/publications/two-decades-structural-transformation-and-dynamics-income-equality-indonesia
Das, M. M., N'Diaye, M. P. M. (2013). Chronicle of a decline foretold: Has China reached the Lewis turning point?. International Monetary Fund. https://www.imf.org/external/pubs/ft/wp/2013/wp1326.pdf
Dastidar, A. (2012). Income distribution and structural transformation: Empirical evidence from developed and developing countries. Seoul Journal of Economics, 25(1), 25-56. https://ssrn.com/abstract=2020903
Fei, J. C., & Ranis, G. (1964). Development of the labor surplus economy; theory and policy.
Firmansyah, F., Sumarno. (2013). Perkembangan wajib belajar 9 tahun di Indonesia periode 1994-2008. AVATARA, e-Journal Pendidikan Sejarah, 1(2), hlm. 198-203. https://ejournal.unesa.ac.id/index.php/avatara/article/view/2387
Fuglie, K. O., Wang, S. L., Ball, V. E. (Eds.). (2012). Productivity growth in agriculture: an international perspective. CABI. http://dx.doi.org/10.1017/S0014479713000094
Gollin, D. (2014). The Lewis model: A 60-year retrospective. Journal of Economic Perspectives, 28(3), 71-88.
Hadiana, M. H., Daud, A. R., Utami, A. W. (2019). Analisis efisiensi penggunaan faktor-faktor produksi pada peternakan sapi perah (Survei pada peternak sapi perah, Kecamatan Pangalengan Jawa Barat). Jurnal Sosial Bisnis Peternakan, 1(1), 11-18. https://doi.org/10.24198/jsbp.v1i1.25489
Hubbansyah, A. K., Husodo, Z. A. (2018). The Interdependence Between the Financial Sector and Business Sector in ASEAN 4 Countries. Journal of Indonesian Economy and Business: JIEB., 33(1), 77-94. https://doi.org/10.22146/jieb.28659
Islam, R. (2014). The employment challenge faced by Bangladesh: How far is the Lewis turning point. The Indian Journal of Labour Economics, 57(2), 201-225.
Islam, R. (2015). Structural transformation and alternative pathways to the Lewis Turning Point. Paper prepared for the International Seminar on Labor and Employment Issues in the Emerging Rural-Urban Continuum: Dimensions, Processes and Policies, 12–14 March, Hyderabad, India. http://dx.doi.org/10.1007/978-981-10-5628-4_2
Juanda, B., Junaidi, J. (2012). Ekonometrika deret waktu: teori dan aplikasi.
Kuznets, S. (1955). Economic growth and income inequality. The American economic review, 45(1), 1-28. https://www.jstor.org/stable/1811581
Lewis, W. A. (1954). Economic development with unlimited supplies of labor. The Manchester School, 22(2), 139–191. https://doi.org/10.1111/j.1467-9957.1954.tb00021.x
Liu, S. (2019). Research on China’s “Lewis Turning Point” and Efficiency Analysis of Each Province—Based on DEA and SFA Methods. Modern Economy, 10(4), 1178-1189. https://doi.org/10.4236/me.2019.104080
Ma, X., & Minami, R. (2022). Dual Economic Structure, Surplus Labour and Rural-Urban Migration. In Growth Mechanisms and Sustainable Development of the Chinese Economy: Comparison with Japanese Experiences (pp. 249-277). Singapore: Springer Nature Singapore.
Mariyono, J., Kompas, T., Grafton, R. Q. (2010). Shifting from Green Revolution to environmentally sound policies: technological change in Indonesian rice agriculture. Journal of the Asia Pacific economy, 15(2), 128-147. http://dx.doi.org/10.1080/13547861003700109
McCaig, B., Pavcnik, N. (2018). Export markets and labor allocation in a low-income country. American Economic Review, 108(7), 1899-1941. https://econpapers.repec.org/article/aeaaecrev/v_3a108_3ay_3a2018_3ai_3a7_3ap_3a1899-1941.htm
Minami, R., Makino, F., Kim, K. (Eds.). (2014). Lewisian Turning Point in the Chinese Economy: Comparison with East Asian Countries. Springer.
Minami, Ryoshin. 1968. The turning point in the Japanese economy. Quarterly Journal of Economics 82, no. 3: 380–402. https://www.jstor.org/stable/i332282
Pingali, P. L. (1997). From subsistence to commercial production systems: The transformation of Asian agriculture. American journal of Agricultural economics, 79(2), 628-634. https://doi.org/10.2307/1244162
Ranis, G. (2012). Labor surplus revisited (Yale University Economic Growth Center Discussion Paper No.1016). New Haven, CT: Yale University. http://www.econ.yale.edu/growth_pdf/cdp1016.pdf
Ranis, G., & Fei, J. C. (1961). A theory of economic development. The American Economic Review, 51(4), 533–565. https://www.depfe.unam.mx/actividades/11/desarrollo-crecimiento/11-2_catcdejr_04_ranis_fei_1961.pdf
Rostow, W. W. (1956). The take-off into self-sustained growth. The Economic Journal, 66(261), 25-48. https://www.jstor.org/stable/i338949
Sen, K. (2019). What explains the job creating potential of industrialisation in the developing world?. The Journal of Development Studies, 55(7), 1565-1583. https://econpapers.repec.org/scripts/redir.pf?u=https%3A%2F%2Fdoi.org%2F10.1080%252F00220388.2017.1404033;h=repec:taf:jdevst:v:55:y:2019:i:7:p:1565-1583
Setiyanto, A. (2015). Analisis penyerapan tenaga kerja perdesaan lahan kering berbasis perkebunan. https://media.neliti.com/media/publications/735-ID-analisis-penyerapan-tenaga-kerja-perdesaan-lahan-kering-berbasis-perkebunan.pdf
Silaban, L. R., & Sugiharto, M. S. (2016). Usaha Usaha yang dilakukan Pemerintah dalam Pembangunan Sektor Pertanian. JPPUMA: Jurnal Ilmu Pemerintahan dan Sosial Politik UMA (Journal of Governance and Political Social UMA), 4(2), 196-210. https://doi.org/10.31289/jppuma.v4i2.458
Supriyati, S. (2010). Dinamika Ekonomi Ketenagakerjaan Pertanian: Permasalahan Dan Kebijakan Strategis Pengembangan. https://media.neliti.com/media/publications/53861-ID-dinamika-ekonomi-ketenagakerjaan-pertani.pdf
Susilo, Y. S., & Handoko, B. S. (2002). Dampak Krisis Ekonomi Terhadap Kinerja Sektor Industri: Pendekatan Model Keseimbangan Umum Terapan Indorani.Journal of Indonesian Economy and Business (JIEB), 17(3). https://media.neliti.com/media/publications/92025-ID-dampak-krisis-ekonomi-terhadap-kinerja-s.pdf
Wie, T. K. (2006). Technology and Indonesia's industrial competitiveness (No. 72). ADBI Research Paper Series. https://www.adb.org/sites/default/files/publication/156680/adbi-dp43.pdf
Wiggins, S. (2016). IFAD RESEARCH SERIES 1-Agricultural and rural development reconsidered: a guide to issues and debates. IFAD Research Series. https://ssrn.com/abstract=3284413
Winardi, W., Priyarsono, D. S., Siregar, H., & Kustanto, H. (2019). Peranan kawasan industri dalam mengatasi gejala deindustrialisasi. Jurnal Ekonomi dan Pembangunan Indonesia, 19(1), 5. https://scholarhub.ui.ac.id/cgi/viewcontent.cgi?article=1244&context=jepi
World Bank (1996) The Chinese Economy: Controlling Inflation, Deepening Reform, The World Bank Publication, Washington, D.C.
Yamada, T. (2016, September). The Turning Point in the Vietnamese Economy: Revisiting Labor Surplus Theory. In Forum of International Development Studies (Vol. 47, No. 5, pp. 1-15). http://dx.doi.org/10.18999/forids.47.5
Yusdja, Y., & Soeparno, H. (2011). Dampak krisis ekonomi terhadap pertanian di Indonesia. Konversi dan Fargmentasi Lahan Ancaman terhadap Kemandirian Pangan. Badan Penelitian dan Pengembangan Pangan, Kementrian Pertanian. Jakarta. http://digilib.ulm.ac.id/cabang/index.php?p=show_detail&id=29661
Zhang, X., Yang, J., & Wang, S. (2011). China has reached the Lewis turning point. China Economic Review, 22(4), 542-554. https://doi.org/10.1016/j.chieco.2011.07.002
Zhu, A., Cai, W. (2012). The Lewis turning point in China and its impacts on the world economy. AUGUR WorkingPaper, (1). http://ss.rrojasdatabank.info/chinalewis11.pdf
Authors
HubbansyahA. K., Dedi Budiman Hakim, Sri Hartoyo, & Widyastutik. (2023). Empirical Analysis of the Lewis Economic Dualistic Theory: The Case of Indonesia: IPB University, International Center for Applied Finance and Economics (Inter CAFE). JURNAL EKONOMI DAN KEBIJAKAN PEMBANGUNAN, 12(1), 1-22. https://doi.org/10.29244/jekp.12.1.2023.1-22
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