EMPLOYMENT ABSORPTION CONDITIONS IN THE CAPITAL CITY OF NUSANTARA
AN ANALYTICAL
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Keywords:
Foreign investment capital, Population growth, Minimum wage, Regional economic growth, Human development, Labor force participation
Abstract
There have been few studies examining the link between open economic and demographic policies and the integration of socio-economic indicators into employment, particularly in developing markets. To address this gap in the literature, this scientific paper investigates the relationship between foreign investment capital and population growth on labor force participation, considering the mediating roles of minimum wages, economic growth, and human development. The study focuses on the Capital City of Nusantara (IKN) as a representation of a new economic growth center in Indonesia. Time-series secondary data from official government sources covering the period 2011–2024 were calculated using moderated regression analysis (MRA). The empirical results reveal that foreign investment capital has a significant negative effect on minimum wages, while population growth significantly and positively influences regional economic growth. Statistically, foreign investment capital significantly reduces human development. Moreover, foreign investment capital, when moderated by minimum wages and regional economic growth, as well as population growth moderated by human development, exerts a significant positive impact on labor force participation. These findings suggest that additional macroeconomic components beyond the current model warrant the attention of policymakers and further research.
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References
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Dash, R., Gupta, D., & Mishra, A. (2025). The nexus between FDI and human development: Non-linear evidence from South Asia. International Journal of Social Economics, 52(3), 325–342. https://doi.org/10.1108/IJSE-05-2023-0380
Del Carpio, X., Nguyen, H., Pabon, L., & Wang, L. C. (2015). Do minimum wages affect employment? Evidence from the manufacturing sector in Indonesia. IZA Journal of Labor and Development, 4(1), 1–30. https://doi.org/10.1186/s40175-015-0040-8
Emako, E., Nuru, S., & Menza, M. (2022). The effect of foreign direct investment on economic growth in developing countries. Transnational Corporations Review, 14(4), 382–401. https://doi.org/10.1080/19186444.2022.2146967
Emako, E., Nuru, S., & Menza, M. (2023). The effect of foreign direct investment on capital accumulation in developing countries. Development Studies Research, 10(1), Article 2220580. https://doi.org/10.1080/21665095.2023.2220580
Fan, H., Lin, F., & Tang, L. (2018). Minimum wage and outward FDI from China. Journal of Development Economics, 135, 1–19. https://doi.org/10.1016/j.jdeveco.2018.06.013
Fazaalloh, A. M. (2024). FDI and economic growth in Indonesia: A provincial and sectoral analysis. Economic Structures, 13(1), 1–22. https://doi.org/10.1186/s40008-023-00323-w
Feriyanto, N. (2016). The effect of employment, economic growth, and investment on HDI: In provinces in Indonesia. The effect of employment, economic growth, and investment on HDI: In provinces in Indonesia. Journal of Economics, Business, and Accountancy Ventura, 19(1), 1–12. https://doi.org/10.14414/jebav.v19i1.537
Giovanni, A. E., & Faridatussalam, S. R. (2023). Analysis of the effect of HDI, foreign investment, domestic investment and population projections on economic growth in Bali province during the period (2017-2021). Balance: Jurnal Ekonomi, 19(1), 24–29. https://doi.org/10.26618/jeb.v19i1.11110
Hidayat, N., Nugrahadi, E. W., Rahman, H., & Daoni, F. (2023). Pengaruh pertumbuhan ekonomi, indeks pembangunan manusia, dan upah minimum terhadap angka pengangguran di Provinsi Sumatera Utara. Jurnal Kependudukan Indonesia, 18(2), 193–202. https://doi.org/10.55981/jki.2023.1074
Hohberg, M., & Lay, J. (2015). The impact of minimum wages on informal and formal labor market outcomes: Evidence from Indonesia. IZA Journal of Labor & Development, 4(1), 1–25. https://doi.org/10.1186/s40175-015-0036-4
Holl, P., & Lork, C. (2025). The role of tax incentives and wage dynamics in shaping foreign direct investment: A Cambodian perspective (2009-2023). Journal of Mathematics Instruction, Social Research and Opinion, 4(3), 687–698. https://doi.org/10.58421/misro.v4i3.502
Hotsawadi, H., Rarasati, I., & Nuzulia, N. (2025). Investigation of the impact of the development of the Nusantara Capital City (IKN): Economic Growth, output and employment. Jurnal Ilmu Ekonomi, 9(03), 295–314. https://doi.org/10.22219/jie.v9i03.41926
Junaidi, A., Busari, A., Kurniawan A., E., Gani, I., & Darma, D. C. (2025). Spillover effect of human capital and human development in shaping agricultural productivity—Scope of Indonesian Capital City (IKN). Tekirdağ Ziraat Fakültesi Dergisi, 22(4), 942–955. https://doi.org/10.33462/jotaf.1540354
Klasen, S. (2019). What explains uneven female labor force participation levels and trends in developing countries?. The World Bank Research Observer, 34(2), 161–197. https://doi.org/10.1093/wbro/lkz005
Komarlina, D. H. L., Surgawati, I., Resti, A., Darma, D. C., & Ashari, I. (2025). Testing factors affecting unemployment rates. South Asian Journal of Social Studies and Economics, 22(8), 347–357. https://doi.org/10.9734/sajsse/2025/v22i81126
Li, X., & Liu, X. (2005). Foreign direct investment and economic growth: An increasingly endogenous relationship. World Development, 33(3), 393–407. https://doi.org/10.1016/j.worlddev.2004.11.001
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Published
2026-03-23
How to Cite
Kustiawan, A., Sukarso, A., Hanapia, A. Y., Purwinahyu, P., Darma, D. C., Nugraha, C. S., & Ashari, I. (2026). EMPLOYMENT ABSORPTION CONDITIONS IN THE CAPITAL CITY OF NUSANTARA: AN ANALYTICAL. Eksis: Jurnal Riset Ekonomi Dan Bisnis, 20(2), 47 - 64. https://doi.org/10.26533/eksis.v20i2.1449
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Copyright (c) 2026 Andriawan Kustiawan, Aso Sukarso, Asep Yusup Hanapia, Purwinahyu Purwinahyu, Dio Caisar Darma, Cindera Syaiful Nugraha, Ihsan Ashari
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