Volume 5, Issue 8, August – 2020 International Journal of Innovative Science and Research Technology

ISSN No:-2456-2165

Application of the Generalized Method of Moment

Arellano-Bond on Economic Growth in Central
Java Province in 2011-2018
Maulana Ghani Yusuf1, Joko Hadi Susilo2, Luthfi Ibnu Tsani3
1,2,3
Magister of Economiccs and Development Studies, Diponegoro University, Semarang, Indonesia

Abstract:- This study aims to analyze the effect of the government. One solution that can be done according to
savings rate, population, human development index, Sodik (2007) is by analyzing the influence of regional
and labor force participation rate on economic growth characteristics. This is because each region has different
in Central Java Province from 2011 to 2018. This study ways of developing economic growth and community
uses a descriptive quantitative method with dynamic welfare according to the potential and characteristics of
panel regression using the Gereralized Method of each region.
Moment Arrelano Bond. The use of this method is
intended to determine the effect of each independent Spatially, the contribution of GDP nationally in 2018
and dependent variable in the previous year on the was mostly contributed by all provinces in Java, which
dependent variable in the research year. amounted to 58 percent compared to other islands. Central
Java Province is the province with the lowest average
The results of this study indicate that simultaneously economic growth in Java from 2014 to 2018, namely 5.31
the independent variable has a significant and positive percent as shown in the table below:
effect on the dependent variable. Then there is an
insignificant negative relationship between the saving Province 2015 2016 2017 2018
rate and the population on economic growth. DI Yogyakarta 4,95% 5,05% 5,26% 6,20%
Furthermore, there is an insignificant positive DKI Jakarta 5,91% 5,87% 6,20% 6,17%
relationship between the development index on Banten 5,45% 5,28% 5,73% 5,81%
economic growth and a significant positive relationship Jawa Barat 5,05% 5,66% 5,35% 5,64%
between the level of labor force participation on Jawa Timur 5,44% 5,57% 5,46% 5,50%
economic growth. Jawa Tengah 5,47% 5,25% 5,26% 5,32%
Table 1:- Percentage of Economic Growth in Java Island in
Keywords:- Economic Growth, Saving Rate, Human 2015 - 2018
Development Index, And Labor Force Participation Rate Source: BPS Central Java Province (2020)
I. INTRODUCTION Muana (2001) in his research states that efforts to
develop economic growth can be said to be successful if
Economic growth according to Sukirno (2011) is there is an increase in the production of goods and services.
defined as an addition to the production of goods and This increase can be seen quantitatively using the value of
services which has an impact on the level of social welfare. the Gross Regional Domestic Product (GRDP). The value
The continuous increase in economic growth shows that the of the GRDP can also be used as a measure of the extent to
joints of the economy in a country or region are running which the economic development of an area can be used as
well. This is because economic growth which always an evaluation and basis for development planning Hendarto
increases every year is the main goal for a government. (2012).
Todaro and Smith (2004) state that success in economic
growth can be shown in three ways, including the ability of Arsyad (2010) in his research states that in the
the community to meet basic needs, an increase in the framework of the Harrord – Domar theory of economic
feelings that people have as human beings in general and an growth, the savings or capital factor has a very large role in
increase in aspects of human rights. increasing economic growth in a country. Jhingan (2000)
added that a high saving rate will also allow opportunities
Economic growth in Indonesia is still quite low if you to increase investment and be able to increase production
look at the average of development from year 2000 to capacity in the economy. Suhel (2015) states that the saving
2018, which is 5.27 percent. Even when compared to other rate does not only come from natural resource wealth, per
countries in ASEAN, Indonesia is ranked 7th out of 10 capita income, or from the sectoral composition of the
ASEAN countries. Furthermore, according to Sodik (2007), Gross Domestic Regional Product (GDRP). However,
apart from low economic growth, another problem, namely savings can also come from other factors depending on the
the impact or effect on the wider community, especially the several characteristics of the savings mobilization policies
poor, is still not very pronounced. The low percentage that are imposed in each region. When viewed in Figure 1
shown regarding the development of economic growth and below, it can be seen that the saving rate owned by the
its low impact on society needs to be considered by the

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Volume 5, Issue 8, August – 2020 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
Province of Central Java has always increased every year, economic development, namely the degree of human
where the highest increase was from 2016 to 2017. development in Tambunan (2003). Based on Table 3 below,
it can be seen that the human development index in Central
180000000
Java Province during 2011 to 2018 was always below the
160000000 163,170,863 national index.
147,562,774
140000000
131,337,356
120000000 116,365,679
100000000 95,704,718
101,957,564 Year Central Java Indonesia
80000000
68,942,373
83,950,899
2011 66,64 67,09
60000000
40000000
2012 67,21 67,70
20000000 2013 68,02 68,31
0 2014 68,78 68,90
2011 2012 2013 2014 2015 2016 2017 2018 2015 69,49 69,55
2016 69,98 70,18
TAHUN NOMINAL
2017 70,52 70,81
Fig 1:- Graph of Central Java Province Savings Position 2018 71,12 71,39
2011-2018 Table 3:- Table of Human Development Index in Central
Source: BPS Central Java Province Processed by Author Java Province 2011-2018
(2020) Source: BPS Central Java Province (2020)

According to classical economic theory, the output Economic growth that occurs in an area can be
produced by a country or region is influenced by population observed through how much workforce there are in an area.
development. Adam Smith in Rochaida (2016) states that This is reflected in the percentage of the labor force
classical economic theory is based on the assumption that at participation rate. Sukirno (2004) states that the labor force
that time land was not scarce, capital had not been taken participation rate is defined as the ratio between the number
into account, and only focused on working capital. of workers and the people who have entered the working
Therefore, population growth is seen as an important factor age in a certain time period and area. The theory of
in boosting economic growth in a country. In Adam Smith's economic growth which discusses labor is the neo-classical
classical economic theory, the concept of the law of Solow-Swan theory which states that in the end economic
diminishing return is not yet applicable. According to him, conditions will depend, one of which, on labor growth in
the ratio between the total population as workers and the addition to the use of technology. Based on Table 5 below,
amount of land that is cultivated will cause a marginal it can be seen that the percentage of the labor force
decline in product so that real wages will also decrease. participation rate in Central Java Province always increases
However, on the other hand, a large population can also be every year and is above the percentage nationally.
seen as a negative thing because it can reduce job However, every year the percentage of the labor force tends
opportunities and increase the unemployment rate of a to decline.
country due to limited employment opportunities.
Year Central Java Indonesia
Province 2010 2015 2020 2011 70.15% 66,78%
Jawa Barat 43.227 46.710 49.936 2012 71.26% 67,76%
Jawa Timur 37.566 38.848 39.886 2013 70.43% 66,77%
Jawa Tengah 32.444 33.774 34.940 2014 69.68% 66,60%
Sumatera Utara 13.029 13.938 14.704 2015 67.86% 65,76%
Banten 10.689 11.955 13.161 2016 67,15% 66,34%
DKI Jakarta 9.640 10.178 10.645 2017 69.11% 66,67%
Table 2:- Projection Table of the Highest Population by 2018 68.56% 67,26%
Province in 2010 - 2020 Table 4:- Table of Percentage of Labor Force Participation
(In a Thousand Souls) Rate in Central Java and Indonesia 2011-2018
Source: BPS Central Java Province (2020) Source: BPS Central Java Province (2020)

The development paradigm in a country can be This research was conducted using dynamic panel
measured and seen through the quality of life of the people regression because in fact some of the economic variables
as reflected in the Human Development Index (HDI). used have dynamic characteristics. The use of data
Increasing quality human resources is one of the efforts to regression with dynamic panels is carried out by adding the
increase economic growth apart from increasing capital. lag of the dependent variable in the previous year to serve
The more productive population will have an effect on the as an independent variable. The use of Ordinary Least
number of labor force participation rates available so that it Square (OLS) estimation will produce biased and
can increase the production capacity of goods and services inconsistent estimates because the lag of the dependent
and reduce the unemployment rate (Todaro, 2004). The variable has a correlation with the error between the
Human Development Index is an important indicator that independent variables. The Generalize Method of Moment
can be used to measure the quality of the results of Arrelando-Bond is used to solve this problem.

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Volume 5, Issue 8, August – 2020 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
Bontems (2002) states that the advantage of the deposit is withdrawn. According to Keynes (in Jhingan,
Generalize Method of Moment Arrelando-Bond is that the 2010) people in general have a certain tendency to save
estimates obtained from research data will be more which is used as a function of income. Robert Solow's
complex and detailed. In addition, according to him, the theory is a theory that underlies saving is used as a factor in
uncertainty of the data parameters used can be resolved economic growth. According to Solow, a high saving rate
using this method. Other advantages of GMM-AB will only temporarily increase economic growth until the
according to Baltagi (2005) include controllable economy reaches a state when the new steady state is
heterogeneity in individuals, more, varied and efficient higher than before.
information provided, and being able to explain and
identify more simply the research data used. Sukirno (2011) states that investment is defined as a
form of shopping or expenditures from various types of
The results obtained from the use of GMM-AB are businesses for the need to purchase capital goods or other
obtained by an econometric model that includes the supplements with the aim of increasing production
economic variables used, including the level of savings, capacity. Furthermore, according to Todaro (2004),
population, human development index, and labor force investment has an important role in the movement of the
participation rate. This will later describe the conditions of nation's economy. This is because the investment will form
economic growth and determine the elasticity of the impact a large capital so that the production capacity is also large.
both in the short and long term in Central Java Province Large investments will make national income increase and
with the observation period of 2011-2019. create new jobs so that it can reduce the level of poverty in
a country. Investment itself is divided into two types,
II. LITERATURE REVIEW namely PMDN (Domestic Investment) and PMA (Foreign
Investment). The difference between the two is from the
A. Economic Growth Theory source of the investment obtained, which comes from
There are several theories regarding economic growth, within or outside the country in a certain time period.
namely views according to classical economics and neo-
classical economics. According to Smith (in Arsyad, 2010), Nowadays, the central government is increasingly
there are three factors that influence classical economic active in offering investments both from within and from
growth including: 1.) available natural resources, 2.) foreign countries in Indonesia. There are two types of laws
number of people or population, 3.) amount of capital or that regulate these two investments, namely Law No.1 of
stock of goods. Robert Solow and Trevor Swan are experts 1967 concerning foreign investment and enhanced by Law
from a neo-classical view of economics. The theory of neo- No.11 of 1970. Furthermore, domestic investment or
classical economic growth originates from the PMDN is regulated by Law No.6 of 1968 which is
understanding that economic growth is characterized by the equipped with by Law No.12 of 1970.
addition or development of several aggregate supply
factors. C. Total population
Population is defined as all people who have a
This theory also emphasizes that production factors domicile or place of residence in a geographic area for at
and technological progress are the determining factors for least 6 months or more or they are domiciled for a period of
economic growth in Sukirno (2004). Boediono (2005) adds less than 6 months but with the aim of settling in the area
that Robert Solow's neo-classical economic model is one (Badan Pusat Statistik, 2018). Adam Smith in Siskawati
form of the development of classical economic theory, the (2014) states that high population growth in an area will
neo-classical economy proposed by Robert Solow if it is result in an increase in output and market expansion both
formed more formally can be described as follows: from within and outside the country. Hasanur (2016)
Y=TKaLt1-a Increasing population is a positive thing and not a problem
because it is considered an important element that can
Where Y is the output produced, while K is the capital trigger economic growth and development. The amount of
owned, L is labor, and T is the level of technological income will have an effect on the population, if the
progress used. The level of technological development in population has increased, the income to be received will
the production function is considered an exogenous factor. also increase.
The main assumption of Solow's economic theory is that
capital in the future will experience diminishing returns. The population growth that occurs in a country
This situation is characterized by a steady supply of labor according to Adam Smith in Jhingan (2010) can trigger the
which will have an impact on capital accumulation on the acceleration of the industrialization process. Population
resulting output to be less (Mankiw, 2006). growth is one of the increasing economic factors because
the capital owned is already abundant so that the prosperity
B. Savings Rate obtained is also high. The theory of neo-classical economic
According to Nopirin (2012) savings are defined as growth shows the relationship between the availability of
deposits whose withdrawal system can be done with certain population in a country and economic growth. The theory
agreed conditions. Kasmir (2008) savings deposits can be of economic growth emphasizes that the population factor
made at any time or at any time where the withdrawal of plays a major role in influencing a country's aggregate
funds does not require a maturity condition such as when a economy. If the consumption of a large proportion of the

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Volume 5, Issue 8, August – 2020 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
population is high, the economy will also grow, which can already available. Sukirno (2004) states that the labor force
be reflected in the country's economic growth rate. participation rate is defined as a comparison between the
number of workers and the number of people who have
D. Human Development Index entered working age in a certain period of time. Then
Saputra (2011) states that the human development according to Mulyadi (2003) the level of labor force
index is defined as a measurement tool for the achievement participation also explains the large number of people who
of human development based on several basic components are said to be the labor force in a certain time set with the
of quality of life. Asnidar (2018) adds that HDI can be used aim of comparing these age groups.
to classify the development of a country and distinguish
between developed, developing, and underdeveloped F. Framework
countries. The level of success of human development can
be seen from the size of the services provided by the
government to the people of Haryadi (2016). The Central
Bureau of Statistics (2020) states that the human
development index is divided into three, including: 1.)
Length of life, can be measured using life expectancy 2.)
Education level, can be measured using length of schooling
and literacy rates, and 3.) The level of feasibility of life as
measured by the ability in the form of per capita
expenditure which is adjusted to the applicable currency.

Asnidar (2018) adds that the human development

index is usually used to determine the level or extent of the
quality of life of the community and determine the level of
development success in an area. Mirza (2012) in his
research states that an increase in economic growth marked
by an increase in quality human capital is believed to be
able to improve the economic performance of people in an
area. Robert Solow said that labor, capital and technology
Fig 2:- Framework
have a big influence on the level of economic growth of a
country.
III. RESEARCH METHODOLOGY
E. Labor Force Participation Rate
This type of research is descriptive quantitative in
Based on Law Number 13 of 2003, labor is defined as
which the data used in this study are secondary data
the ability to do work with the aim of producing the
obtained from the Central Bureau of Statistics. These data
production of goods or services that are used to meet their
include independent variables (savings rate, population,
own needs which can be done by everyone. The minimum
human development index, and labor force participation
age limit for a person to be included in the working age
rate). Then for the dependent variable data, namely
according to the Labor Force Survey (SAKERNAS) is 15
economic growth in Central Java Province in 2011 to 2018.
years. The working age limit is in accordance with the
The population of this study were 35 districts and cities in
provisions made by the International Labor Organization
Central Java Province with the observation year 2011-2018
(ILO).
so that the number of samples in this study was 315
samples with the quota sampling technique. This research
Nainggolan and Indra (2009) there are several
was conducted using dynamic panel regression analysis
concepts regarding employment, including: 1.) Labor,
Generalized Method of Moment Arrelano Bond using Stata
which is defined as residents who have aged 15 years and
software.
over who are able to produce goods or services, 2.) The
workforce, including part of the workforce which is defined
IV. RESULTS
as residents whose main activity is working during the
week and who are looking for work, 3.) Non-workforce,
This research was conducted with two steps of data
residents who are 15 years old or more but whose main
analysis including the first through simultaneous testing
activity is not working such as taking care of the household
using Ordinary Least Square (OLS). Furthermore, for the
or going to school, and 4.) Level of participation labor
second step, namely by conducting an analysis using the
force, is the ratio between the number of workers and the
Generalized Method of Moment Arrelano Bond.
labor force available in a certain area and at a certain time.

The Central Bureau of Statistics (2012) states that the

labor force participation rate is defined as the ratio between
the working age population in the labor market, who are
either working or looking for work so as to provide
supplies to workers in managing natural products that are

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Volume 5, Issue 8, August – 2020 International Journal of Innovative Science and Research Technology
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12
Series: Standardized Residuals 0.05. The multicolonierity test results can be seen in the
10 Sample 2011 2017 table below:
Observations 52
8
Mean -9.29e-15 IPM TPAK JP TAB
6
Median 0.598274
IPM 1.000000 0.666447 0.408311 0.704513
Maximum 187.9765
Minimum -130.3908 TPAK 0.666447 1.000000 0.350589 0.761873
4
Std. Dev. 71.07793 JP 0.408311 0.350589 1.000000 0.127450
Skewness 0.228400
2 Kurtosis 3.014077 TAB 0.704513 0.761873 0.127450 1.000000
Table 5:- Multikolonierity Test
0 Jarque-Bera 0.452541
-150 -100 -50 0 50 100 150 200
Probability 0.797502
Source: Processed by Author (2020)
Fig 3:- Normality Test The value based on Table 6 above shows that none of
Source: Processed by Author (2020) the independent variables is above 0.8. This means that all
the independent variables used in this study are free from
The probability value in Figure 2 above shows a value multicollinearity symptoms.
of 0.79, which means that the data used is data that is
normally distributed because it has a value greater than

Variable Coefficient Std. Error t-Statistic Prob.

IPM 2.06E+09 1.31E+09 1.572765 0.1225
TPAK -0.000192 0.000179 -1.076214 0.2873
JP -1.35E-05 1.37E-05 -0.982864 0.3307
TAB -102634.4 59433.42 -1.726880 0.0908
C 103.4758 49.13083 2.106127 0.0406
R-squared 0.209745 Mean dependent var 56.24959
Adjusted R-squared 0.142489 S.D. dependent var 49.04308
S.E. of regression 45.41481 Akaike info criterion 10.56077
Sum squared resid 96937.74 Schwarz criterion 10.74838
Log likelihood -269.5799 Hannan-Quinn criter. 10.63269
F-statistic 3.118620 Durbin-Watson stat 1.468971
Prob(F-statistic) 0.023470
Tabel 6:- Heterokedastisity Test
Source: Processed by Author (2020)

The probability based on Table 7 above shows that all percentage is quite low partially but if seen simultaneously
independent variables on the absolute residual variables is significant. The coefficient value for the dependent
used in the study have a value above 0.05, meaning that all variable on economic growth at lag 1 is 0.264 or a value
variables are free from heteroscedasticity. The following is less than 1 so that the estimation to find the coefficient is
the Estimation Result of Ordinary Least Square (OLS): consistent. Because the partial test on the Ordinary Least
Square (OLS) above is quite low, it is necessary to carry
Predictor Coefisien
Standart t P-value out further tests through partial tests using the GMM-AB
Eror
δPEi,t-1 0.2642956 0.0622618 4.24 0.000 Prediktor Koefisien Standard Z P-
IPMi,t -8.87e+08 6.41e+08 1.38 0.169 Eror value
TPAKi,t -8.79e-07 0.0000797 0.01 0.991 δPEi,t-1 -0.2597689 0.1057989 -2.46 0.014
JPi,t 0.0000178 0.0000167 1.06 0.289
0.48 0.633 IPMi,t 1.48e+09 4.69e+09 0.32 0.753
TABi,t -19066.5 39903.11
β0 152.0616 38.70655 3.93 0.000 TPAKi,t 0.0003685 0.0001783 2.07 0.039
2
R = 0.1867 Prob (F-statistic) =0.0000 JPi,t -0.0008037 0.0005059 -1.59 0.112
Table 7:- Estimation Results of Ordinary Least Square TABi,t -345985.7 196872.6 -1.76 0.079
(OLS) Table 8:- Partial Test Results Generalized Method of
Source: Processed by Author (2020) Moment
Source: Processed by Author (2020)
The F statistical probability value is 0.0000 with a
significance level in this study of 0.05 or 5 percent. This The p-value on the independent variables includes
means that there is a simultaneous significant influence on HDI of 0.753, TPAK 0.039, population of 0.112, and a
the independent variable in explaining the dependent savings rate of 0.079. Thus, partially the independent
variable. Then the R-Square value shows a number of variable that has a significant positive effect on the
0.1867 indicating that the effect of the independent variable dependent variable is only found in the TPAK variable or
in explaining the dependent variable is 18.67 percent. This the level of labor force participation because it has a value

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Volume 5, Issue 8, August – 2020 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
below 0.05 and a coefficient of 0.00. This shows that the growth by 0.000017 percent in the short term and increase
predictor model in this study can be used. 0.00071 in the long term. Furthermore, the TPAK variable
has an influence on economic growth where every 1
Order Z Prob percent increase in TPAK will increase the rate of
1 -2.9879 0.0028 economic growth both in the short and long term with
2 -1.4148 0.1571 elasticities of 0.000017 and 0.000719, respectively.
Table 9:- Arellano-Bond Test Results
Source: Processed by Author (2020) Then the population number variable has an influence
on the rate of economic growth where every 1 percent
The Arrelano-Bond test results show that the use of increase in the population will decrease the economic
the dynamic panel method with this approach has met growth rate by 0.00018 in the short term and increase
several criteria for the best model, namely consistency and 0.00019 in the long term. Furthermore, the latter is the
the instrument variables used are valid. The results on savings rate variable where every 1 percent increase in
Arrelano Bond (AB) on order 1 show a probability value of economic growth will reduce economic growth in the short
0.0028 and order 2 of 0.1571. term by 733986.7 and increase economic growth in the long
term by 42014.39.
Sargan Test Chi2(5) 22.35067
Prob > chi2 0.0004 The analysis used in this study is the Generalized
Table 10:- Sargan Test Results Method of Moment Arrelano Bond (GMM-AB). The use of
Source: Processed by Author (2020) the GMM-AB method is carried out because some of the
variables in this study have a dynamic character, meaning
The probability value in Table 8 above shows a value that they always change every year. The results in this
of 0.05 with an alpha α level of 5 percent. This shows that study indicate that simultaneously the independent
the estimates used in this study can be said to be consistent variables used, namely the savings rate, population, human
and there is no autocorrelation in the first order difference development index, and labor force participation rate have
error. The following are the results of the GMM-AB test: an effect on the dependent variable, namely economic
growth in Central Java Province. However, this study also
Predictor Coefisien P- Elasitisitas shows that the influence of the independent variable in
value partially explaining the dependent variable is still quite low,
Short Long
namely 18.67 percent, so that other variables are needed
Term Term
that can be used to explain economic growth in Central
δPEi,t-1 - 0.015
Java Province.
0.2597689
IPMi,t 1.48e+09 0.754 -7.77e+09 1.07e+10
A. The Effect of Savings Rate on Economic Growth
TPAKi,t 0.0003685 0.040 0.0000172 0.0007199
Based on the results of testing using the Generalized
JPi,t - 0.114 - 0.0001932
Method of Moment Arrelano Bond (GMM-AB), it shows
0.0008037 0.0018007
that there is an insignificant negative effect between the
TABi,t -345985.7 0.081 -733986.7 42015.39 two. The relationship between the saving rate and economic
β0 1069.04 0.079 growth is negative and insignificant according to research
Table 11:- Generalized Method of Moment Arellano-Bond by Indra and Dita (2016). This is due to the fact that the
(GMM-AB) Test Results income of most people in Central Java Province is still
Source: Processed by Author (2020) quite low, so the interest rate received is also small. This is
one of the reasons why people tend to save quite low. In
Based on Table 12 above, the lag coefficient of addition, according to Jhingan (2010), the saving rate can
economic growth p-value has a value below 0.05 and a be a bad thing because an excess in the saving rate will
negative coefficient means that economic growth in the have an impact on reducing aggregate demand which
previous year has a significant effect and is negatively causes the production of goods and services to decrease.
related to economic growth in the period in this study. In The reduced level of production of goods and services will
table 12 above, it can also be seen that the relationship of cause producer incomes and economic growth to decline.
each independent variable to the dependent variable. The
variables of saving rate and population have a negative and In addition to knowing the relationship between the
insignificant effect on economic growth. Meanwhile, the savings rate variable on economic growth, the GMM-AB
HDI variable has an insignificant positive effect and TPAK method also knows the elasticity in the short and long term
has a significant positive effect on economic growth. between each variable. The results in this study indicate
that in the short term the saving rate has a negative effect
In addition to the influence of the independent on economic growth because high capital in the short term
variables on the dependent variable, GMM-AB also knows is unable to increase economic growth so that the impact
about short and long term elasticity. Based on Table 12 will only be felt in the long term. The benefits of saving or
above, it can be seen that the human development index capital will be felt in the long term because the higher the
variable has an influence on economic growth where every savings rate in the long term, the higher the interest you
1 percent increase in HDI will reduce the rate of economic will get.

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Volume 5, Issue 8, August – 2020 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
Based on the results of the research above, it can be short term it has a negative effect while in the long term it
seen that the savings rate variable has an insignificant has a positive effect. This is because in the short term the
negative relationship to economic growth in Central Java relationship between the human development index has not
Province in the period 2011 to 2018. This is in accordance had a major impact on economic growth, it can even have a
with the theory of Keynes in Jhingan (2010) which states negative effect than in the long term. For example, if the
that savings can be appropriate bad because there is an percentage of economic growth that rises in a country is not
excess of saving which causes a decrease in aggregate qualified, it means that only relying on the consumption
demand, which results in a decrease in the rate of economic sector will have a negative impact on the human
growth. development index so that it can decrease.

B. The Effect of Total Population on Economic Growth Based on the research results above, it shows that
The results of this study indicate that the population there is an insignificant positive influence between the
has a significant positive effect on economic growth. The human development index variable and the level of
relationship between total population and negative economic growth in Central Java Province from 2011 to
economic growth is insignificant because if the population 2018. This is in accordance with the theory of neo-classical
in a country increases, the opportunity to get a job becomes economic growth by Robert Solow where one of the main
smaller so that people become more unproductive and can production factors in shaping economic growth is labor.
reduce economic growth. This is consistent with research The human development index itself is used to describe the
by Purwaningsih (2011) which states that population has a extent to which human development indications can run
negative effect on economic growth. well. If the value of the human development index is high,
it shows that the measure of the quality of the workforce
Then, when viewed from the elasticity in the short which consists of education, health, and life expectancy is
term, there is a negative effect between population size and also good.
economic growth. Meanwhile, in the long term, it has a
positive effect. This is because in the long term, the D. The Effect of Labor Force Participation Rate on
increase in population will be more controllable by the Economic Growth
government than in the short term. For example, various Based on the results of this study, it is stated that the
government programs can be realized if they are carefully relationship between the level of labor force participation
planned and carried out in a long and sustainable manner. and economic growth is a significant positive. A significant
positive relationship between the level of labor force
Based on the results of the research above, it can be participation and economic growth is caused because if the
seen that there is a significant negative effect between the percentage of the labor force participation rate is high, it
population size variable on economic growth in Central indicates that the population or community is working more
Java Province from 2011 to 2018. This effect is in so that unemployment is reduced. The increasing number of
accordance with the theory by Malthus in Purwaningsih people working indicates that society is becoming more
(2011) which states that in the initial conditions the productive and the opportunity to produce goods or services
population a high rate can affect the economic growth of a increases. This situation makes there is an increase in
region, but at an optimum condition, population growth economic growth in a country or region.
will actually result in a decrease in economic growth.
Then when viewed from the elasticity in the short and
C. The Effect of the Human Development Index on long term, the variable of labor force participation rate is
Economic Growth the only variable that has a significant positive effect. This
Based on the results of this study, it is stated that there shows that if there is an increase in the level of labor force
is a significant positive relationship between the human participation, economic growth will also increase both in
development index and economic growth. The positive and the short term and in the long term. The elasticity value is
insignificant relationship between the human development higher in the long term of 0.000719 compared to the short
index and economic growth in this study is because if the term of 0.000017.
value of the human development index is high it indicates
that the indices in it such as health, education, and others Based on the results of the research above, it shows
are also high so that the effect on economic growth will that there is a significant positive relationship between the
increase. For example, one part of the human development variable rate of labor force participation and economic
index is the level of education. The higher the level of growth in Central Java Province from 2011 to 2018. This is
education of the community in an area will cause the ability in accordance with Robert Solow's theory of economic
and skills of the community to also increase and affect the growth, which states that one of the main factors shaping
ability to produce goods and services. If the goods and economic growth is energy. work. The labor force
services produced by the community increase, it will be participation rate variable shows the percentage of the large
able to encourage the joints of the economy so that number of the population at working age who have worked
economic growth will increase. so that the population is more productive and reduces the
unemployment rate. This of course will have implications
Then when viewed from the short and long term for the betterment of the economy so that economic growth
elasticity, there is a difference in elasticity where in the can also increase.

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Volume 5, Issue 8, August – 2020 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
V. CONCLUSION  The Central Java Provincial Government should make a
breakthrough in the form of policies to improve the
 Based on the results of the data analysis and discussion welfare of the community as stated in the Regional
described above, it can be concluded that Medium Term Development Plan (RPJMD). This
simultaneously economic growth in Central Java policy is necessary so that although the population in
Province is influenced by several variables, namely the Central Java Province is quite high, if the level of
level of savings, population, human development index, welfare is high, it will have a major impact on the
and labor force participation rate. welfare of the community as reflected in the human
 The saving rate has an insignificant negative effect on development index. In general, the labor force
economic growth in Central Java Province from 2011 to participation rate in Central Java Province is quite good
2018.These results can provide a reference that the because it has increased every year. However, the
excess in the saving rate will have an impact on Central Java provincial government should start making
reducing aggregate demand which causes the policies such as training or development of workforce
production of goods and services to decrease so that skills. This is because the percentage of the labor force
producer income and growth the economy is also down. participation rate from 2011 to 2018 tends to show a
The elasticity in the short term between the saving rate decreasing trend every year.
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