Research Overview
Research Background
The ASEAN countries have a total population of over 650 million people and in 2019 a total of over USD 3 trillion in gross domestic product (GDP) contributed to global GDP (Neill, 2021). While trade between ASEAN and the United States has reached more than $292 billion in 2019 (Maizland and Albert, 2020).
Labour Productivity in ASEAN Countries
- Malaysia
- Vietnam
- Indonesia
- Thailand
- Philippines
From the diagram below, it can be clearly seen that during 2019, Malaysia experienced a severe decline in its labor productivity caused by the global COVID-19 pandemic. According to the International Labor Organization (2021), Indonesia's labor productivity by working hours for transportation and warehousing decreased by 13.2%, for accommodation and.
COVID-19 Pandemic
Effectiveness is a measure of the quality of output and how well a policy achieves its intended goals. Therefore, according to the theory, as long as the government is very effective, the spread of the epidemic will be well controlled, and the disease will be killed in the cradle.
Employment
Fortunately, they recovered in the following two quarters as the government began to respond to the impact of the pandemic. On the other hand, Malaysia, Thailand and Vietnam have the least impact as the volatility of the number is low.
Gross Fixed Capital Formation
The world has been hit hard by the COVID-19 pandemic, they are facing a reduction in gross fixed capital formation, while Vietnam is almost at a standstill.
Problem Statement
Many manufacturing industries are unable to operate and produce due to the operation of these policies, and the country's labor productivity has fallen sharply (Jin, Zhang, Sun & Cui, 2021). The countries selected are also based on the number of cases, reduction in labor productivity and data availability.
Research Question
The table above shows that the overall impact of COVID-19 is much worse than the financial crisis of 2008. For example, we can see that in Malaysia, Indonesia, Thailand and the Philippines, the COVID-19 pandemic has decreased even more compared to the financial crisis of 2008, except in Vietnam. This is because the Vietnamese government can monitor international economic development trends, identify problems in time, and then take precise and coordinated measures to limit the serious impact of the economic crisis (APRACA, 2017).
In addition, they are also good at seizing opportunities to maintain the country's growth potential and promote economic development.
Research Objective
Scope of Study
Significance of Study
According to Achuo (2020), the study showed that the government plays an important role in reducing the spread of COVID-19 in the African country. In our research, readers or researchers can get information about the impact on labor productivity in ASEAN countries during the coronavirus pandemic. Our research can help most people understand the labor productivity of ASEAN countries during the COVID-19 pandemic, especially policy makers, employers and employees.
The result of our analysis is that we provide them with insight into the impact on labor productivity during the pandemic.
Organization of Chapters
However, we will only focus on investigating the relationship between capital, workers and labor productivity. The traditional Cobb-Douglas production function itself is not sufficient for determining labor productivity. Labor productivity will use the increase in labor productivity as the determination of the dependent variable.
For the fixed-effect model (FEM), she showed that there is no relationship between capital deepening and labor productivity growth.
Literature Review
Introduction
Theoretical Review
Physiological needs and safety needs are the basic needs of people as a motivational factor. Maslow's hierarchy of needs explaining the relationship between employment and the number of COVID-19 cases accompanied by productivity. Therefore, Maslow's hierarchy of needs is essential to our research to determine the central reference theory that observes the scenario of increasing or decreasing Labor productivity.
Maslow's Hierarchy of Needs helps explain the motivational and human psychological factors that influence workers.
Empirical Review
- Labour Productivity and Application of Cobb Douglas Production Function
- Government Efficiency and Labour Productivity
- Employment and Labour Productivity
- Capital Input and Labour Productivity
According to Fornaro & Wolf (2020), the study used the New Keynesian model to determine labor productivity on global output. According to Burda, Genadek, & Hamermesh (2017), the research shows that there was a positive correlation between labor productivity and unemployment. The research shows that when unemployment rises, labor productivity will decline in the long run.
With high-quality skilled labor coupled with the advancement of capital capable of bringing about a crucial change in the direction of labor productivity.
Chapter Summary
In this study, the COVID-19 pandemic is one of the major unforeseen circumstances resulting in a major impact on labor productivity, which cannot be avoided. Capital deepening is implied by the capital-labour ratio where it is a common definition of labor productivity. According to Apostolov (2016), it is also one of the main dependents for labor productivity in the analysis.
The third type of the model is that the slope will be different compared to the normal FEM.
Methodology
Introduction
Dataset is the combination of dependent variables and independent variables such as workers' wages and the Labor productivity. After that, since we use the data sets with the combination of time series and cross-section, panel data analysis will be applied in our study. The analysis method of which model best fits our study is also indicated in this chapter where we use Hausman test, Poolability F test and Breusch Pagan Lagrange Multiplier test for determining the best model.
Also, the normality and multicollinearity test was applied in determining the validity of the model.
Research Design
This chapter focuses on the introduction and application of several suitable econometric models that fit our research topic, Labor Productivity. These models are used as tools to explore the relationship between data sets as a result of our exploratory analysis. Combined with our panel data will be government efficiency, which we will analyze using the number of COVID-19 cases, the number of persons employed in each ASEAN country, and gross fixed capital formation.
The three models that come to suggest in our study are Pooled Ordinary Least Square model (Pooled OLS), Fixed Effect Model (FEM) and Random Effect Model (REM).
Data Description
Model Specification
- Econometric Model
The table 3.3 below shows the summary of both endogenous and exogenous variables applied in this analysis. The 𝐿𝑃𝐺𝑖𝑡 denotes the Labor productivity growth, ln (𝐺𝐸)𝑖𝑡 which represents the logarithm for the government efficiency, ln(𝐶𝐷)𝑖𝑡 which represents the capital-labour, which represents the capital deepening, which represents the ratio the error terms and the 𝛼 which represents the shows estimated coefficients and the i and t represent the countries and time frame respectively.
Model Estimation
- Pooled Ordinary Least Square Method (Pooled OLS)
- Fixed Effects Model (FEM)
- Random Effects Model (REM)
Under this FEM, however, there will be different types of variations for the model, only one of which will be suitable for our model estimation. Under REM, we assume that the intercept is different across the countries, the slopes are the same, and the error term within the model should be normally distributed. This has been shown to successfully eliminate the bias on the variables within the model (Alam, 2020).
From the equation above, it showed that we have added an additional individual specific error term on the model.
Model Selection
- Poolability F-Test
- Hausman Test
- Breusch Lagrange Multiplier Test (BP LM)
- Normality Test: Jarque Bera Test
- Multicollinearity Test
On the other hand, if the alternative hypothesis states that there is an occurrence of the independent effects, the FEM (Fixed Effect Model) will be recommended as our model estimation. It can be further elaborated by testing whether the existence of the individual specific variance component inside the model is an appropriate model (Saada, Haniffb, & Alic, 2016). The null hypothesis indicates that there is no effect from the variance of the error term, which means that the Pool OLS model is preferable.
While the alternative hypothesis posits that there is a significant influence of the variance of the individual specific variance of the error term.
Chapter Summary
If VIF > 10 and R-squared > 0.9, this means there is high collinearity in our model estimates.
Empirical Result and Discussion
- Introduction
- Panel Data Analysis
- Model Selection
- Diagnostic Testing
- Normality Test
- Multicollinearity Test
- Chapter Summary
From the results shown from the pooled OLS model, it was evident that only capital deepening is significantly related to labor productivity growth at 10% and 5% significance levels. This means that with an increase in capital deepening by 100%, on average, labor productivity growth increases by 7.550724% ceteris paribus. While the Random Effect Model (REM) showed that capital deepening is significantly related to labor productivity growth.
The above analysis showed that the Pooled OLS model had only one significant variable in labor productivity growth, namely capital deepening.
Conclusion, Limitation, and Recommendations
Introduction
Major Findings
The panel data results showed that government efficiency played an important role in the estimated relationship with Labor productivity growth under the FEM and REM. While for the Pooled OLS model it showed that there was no relationship between the Labor productivity growth and government efficiency. The results showed that an increase in government efficiency will also increase Labor productivity.
This means that there is a positive relationship between the efficiency of the country and the growth of labor productivity.
Implications of Study
Limitations of Study
Recommendations for Research
Pridobljeno s https://www.intereconomics.eu /contents/year/2017/number/1/article/the-global-productivity-slowdown-diagnosis-cau ses-and-remedies. Pridobljeno iz https://www.ilo.org/wcmsp5/groups/public/-- -dgreports/---dcomm/documents/briefingnote/wcms_738753.pdf. Pridobljeno iz https://www.ilo.org/hanoi/Informationresources/Publici nformation/comments-and-analysis/WCMS_741638/lang--en/index.
Retrieved from https://www.oecd.org/coronavirus/policy-responses/covid-19-crisis-response-in-asean-member-states-02f828a2/. Retrieved from https://www.oecd.org/industry/ind/promoting-productivity-of-SMEs-in-ASEAN -countries.pdf. Retrieved from https://www.webmd.com/cold- and-flu/flu-guide/h1n1-flu-virus-swine-flu#1.
