Labour Market Integration in Developing Countries: a Case Study of Indonesia

This paper investigates the short- and long-run Indonesian regional labour market integration using Johansen's system approach. The authors have tested for a number of co integrating relationships and common trends among West-Java, East-Java, Central-Java and Jakarta, wage rates, and for the validity of the relationships between these wages implied by perfect market integration. The authors have then analysed an error correction model incorporating long-run equilibrium relationships and short-run dynamics.