The Indonesian government has pinned its hope for reducing unemployment on higher economic growth and increased labor market flexibility, such as lowering minimum wages. The estimated sectoral employment functions reveal that output growth rather than real wages is the major determinant of...

This research was motivated by current constraints on macroeconomic policy-making in Indonesia. On the fiscal side, the government is burdened with debt and the pressure to maintain social expenditure. On the monetary side, there is a preoccupation with a lower inflation rate which conflicts...