The productivity of the agricultural sector and industrial sector as a driving force of economic growth and community welfare in Indonesia

Abstract

Purpose This study aims to examine the effect of trade liberalization on welfare, directly or indirectly, through the productivity of the agricultural sector and the productivity of the industrial sector, which affects economic growth and the welfare of the community.Design/methodology/approach This study is explanatory as it looks at causal relationships between one variable with another (causality relationship). The data used in this study are secondary data from various sources, such as the International Financial Statistics (IFS) from the International Monetary Fund (IMF), World Bank, Bank Indonesia reports, Central Bureau of Statistics and several other sources. All data used in this study is annual data for each research variable from 1986 to 2016.Findings Based on the results of the analysis, there is a significant direct and negative influence of the agricultural sector productivity on economic growth, a significant direct and negative influence of the industrial sector productivity on economic growth.Originality/value Considering the diverse effects of trade liberalization both on economic growth and people's welfare in developing countries, the researcher was interested in knowing how trade liberalization affects Indonesia. This study tries to observe and analyze those relations.