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EXPLORING THE INDONESIAN ECONOMIC LANDSCAPE AND STRUCTURAL CHANGE | Firdaus | Journal of Indonesian Economy and Business 6252 10658 1 PB

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Journal of Indonesian Economy and Business Volume 27, Number 1, 2012, 19 – 28

EXPLORING THE INDONESIAN ECONOMIC LANDSCAPE AND

STRUCTURAL CHANGE

1

Muhammad Firdaus

Faculty of Economics and Management IPB

([email protected])

Budi Kurniawan

Faculty of Economics and Management IPB ([email protected])

Sri Mulatsih

Faculty of Economics and Management IPB ([email protected])

ABSTRACT

In assessing the economic impact of a sector or a group of sectors on a single or multiregional economy, input-output analysis has been proven to be a popular method. This paper explores the degree of structural change of the Indonesian economy using the input-output frame work. It examines how linkages among economic sectors have evolved from 1971-2008 and identifies which economic sectors exhibited the highest inter-sectoral linkages. The study finds that manufacturing consistently becomes the key sector in the Indonesian economy. Indonesian cannot afford to leapfrog the industrialization stage and largely depend on a service-oriented economy when the potential for growth still lies primarily in manufacturing. The graphical presentation of inter-industry relationship through the “Multiplier Product Matrix” (MPM) and its associated “economic landscape” provides a visualization of the Indonesian economic landscape for selected years and how it has changed over time.

Keywords: economic landscape, structural change, input output model, key sector

1 This paper has been awarded as the first runner up

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