DETERMINANTS OF OPEN UNEMPLOYMENT IN EAST JAVA: EVIDENCE FROM REGIONAL ECONOMIC AND LABOR MARKET DYNAMICS
Keywords:
open unemployment, labor market dynamics, regional labor economics, human capital, developing economyAbstract
This study examines the determinants of open unemployment in East Java, Indonesia, by integrating wage policy, labor force participation, human capital, regional investment, and the COVID-19 shock within a unified regional panel framework. Using a balanced panel dataset covering 38 districts and cities over the 2017–2024 period (304 observations), the study applies panel regression. The findings reveal that district/city minimum wages have a positive and statistically significant effect on open unemployment (β = 0.1508; p = 0.034), indicating a potential wage–employment trade-off in regional labor markets. In contrast, labor force participation and regional investment do not exhibit statistically significant effects. Mean years of schooling has a negative but only marginally significant relationship with unemployment (β = −0.1273; p = 0.081), suggesting that educational expansion alone may be insufficient when skill formation is not adequately aligned with labor market demand. The COVID-19 pandemic emerges as the strongest determinant, with a positive and highly significant effect on unemployment (β = 0.4231; p < 0.001), highlighting the vulnerability of regional employment systems to external economic shocks. The results demonstrate that unemployment dynamics in East Java are shaped more strongly by wage-setting mechanisms and macroeconomic disruptions than by conventional labor supply and investment indicators. The study contributes to the regional labor economics literature by providing subnational evidence from a heterogeneous developing economy and highlights the need for productivity-linked wage policies, employment-intensive investment, demand-responsive human capital development, and stronger labor-market resilience.
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