Vol.
11 No .
: June, 2023 p-ISSN: 1978-3795.
e-ISSN: 2721-6721 Posted: June, 15-2023 Accepted: June, 20-2023 Published: 2023-06-30 Identify The Effect Of Trade Openness.
Government Spending And Labor Force on Economic Growth IN ASEAN Countries Budhi Setiawan1.
Marselina2 dan Arif Darmawan3,* 1,2,3 Departement of Economics Development.
University of Lampung * Korespondensi: arif.
darmawan@feb.
Abstract: As a result of globalization, countries in the world are required to expand the scope of their economic Trade openness is critical to the globalization of international trade barriers, as tariff and non-tariff barriers diminish.
Trade openness is a contributing factor to the growth of both developed and developing Openness of trade can provide opportunities for each country to export goods whose factors of production use abundant resources and import goods whose production will be expensive if produced The purpose of this study is to determine trade openness, government spending and the workforce on economic growth.
Eight ASEAN members were included in the sample study for the period 2015 to 2020:
Indonesia.
Malaysia.
Brunei Darussalam.
Thailand.
Singapore.
Vietnam.
Philippines and Myanmar.
In panel regression, the Fixed Effect Model is used to determine how trade openness, government spending and the labor force affect economic growth.
Both labor force and trade openness variables have a positive and significant effect on economic growth, while the government spending variable has a negative and significant effect on economic Keywords: Economic Growth.
Trade Openness.
Government Expenditure.
Labor Force JEL: O1.
F0.
INTRODUCTION
Both temporarily and permanently, economic growth is a macroeconomic challenge and a significant Economic growth is the expansion of a country's economic activities that results in an increase in the output of goods and services, increases the prosperity of society in the long term, and becomes one of the indicators of a country's development (Marselina, 2.
If the level of the economy is greater than at any previous time, the economy is considered to be changing in terms of its An economic goal and a measure of a country's long-term performance can be economic Economic growth will be easier to achieve for countries that are able to optimize their driving variables, and vice versa.
One of the goals of national development is the advancement of economic development for the welfare of its people (Yuliawan & Wanniatie, 2.
According to research (Tahir & Azid, 2.
a number of international institutions, including the World Trade Organization, the International Monetary Fund and the World Bank, continue to accelerate the process of trade liberalization to achieve strong economic growth Countries in the world are encouraged to expand the scope of their economic activities as a result of Financial and trade openness is essential for globalization.
According to (Wahyudi & Ayunindien, 2.
The space or dimension of globalization is a means for countries to expand economic market opportunities in order to increase economic growth.
International trade barriers, both tariff and non-tariff barriers, are removed or dismantled in trade openness.
On the other hand, financial transparency shows the smooth movement of capital across the country.
According to (Ichvani & Sasana, 2.
trade openness is the process of lowering, eliminating trade These barriers include tariffs, quotas intended to increase imports, exchange rates, and administrative import permit procedures.
Every nation is under pressure and is given the opportunity to do so by making economic cooperation contacts with other nations.
Trade openness is a significant driver of prosperity in both developed and developing countries.
because according to (Salvatore, 2.
trade openness is said to be able to advance the economic https://equity.
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Identify The Effect Of Trade Openness.
Government Spending And Labor Force on Economic Growth IN ASEAN Countries development of a nation.
The ability to trade openly can provide an opportunity for each country to sell products that use abundant resources and import products that are difficult or expensive to produce The inability of a country to meet local needs is caused by differences in the cost benefits of the products it produces.
Each country can carry out exchange transactions for goods that cannot be produced locally thanks to the openness of the economic system which allows it to meet the demands of its own population.
increased competitiveness and employment opportunities.
Table 1.
Economic Growth of 8 ASEAN Countries in 2015-2020 in percent (%) Year
Avera
Indones Malays Brunei Darussala
-0,39
0,05
0,59
Thaila
Singapo
Vietna
Philippin
Myanm
-9,52
Source: World Development Indicators.
World Bank, ( 2.
International trade promotes long-term economic growth, which is the link between economic growth and trade.
Trade is an important part of a country's development and contributes to faster economic growth in many other countries.
The more trading activities a country has, the faster its economic growth Economic growth is a measure of economic growth to characterize the economic situation of a The country with the highest economic growth is Vietnam, which is 6.
32 percent.
Of the eight ASEAN countries.
Brunei Darussalam has the weakest economic growth.
Trade openness is only one aspect that influences how well or badly a country's economic performance is.
other variables, such as employment and government spending, also have a significant impact on economic growth.
The main fiscal weapon among other economic strategies is government spending.
The hypothesis also supports the significant influence of government spending on economic growth and stability.
on research (Nowbutsing, 2.
which examines economic development in an era of economic openness while still taking into account the determinants of government spending.
The analysis and discussion of the relationship between economic growth and government spending is very significant (Maharani, 2.
Government spending will provide a multiplier effect on the economy, which will increase benefits for economic growth, the more spending is spent.
According to the findings of the study (Ichvani & Sasana, 2.
, higher/higher government spending causes faster economic growth.
Apart from government spending, another factor affecting economic growth is the availability of labor, which is one of the key factors in a country's economic growth.
His research shows that investing in human capital growth can increase that capital, which will ultimately have the same beneficial impact on output statistics, but even more so given ongoing population growth.
(Khoirul Ifa, 2.
that a productive workforce will contribute to the success of economic growth because it is the backbone of human resources to realize economic progress.
LITERATURE REVIEW
Economic Growth https://equity.
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Identify The Effect Of Trade Openness.
Government Spending And Labor Force on Economic Growth IN ASEAN Countries Economic growth, which is often measured by an increase in GDP, is defined as an increase in national income.
Economic growth is defined as the increase in GDP or GNP, regardless of whether the increase is greater or less than the rate of population growth, regardless of changes in economic structure, and regardless of whether institutional improvements have been made or not.
According to (Sukirno, 2.
economic growth is the expansion of economic activity that increases the amount of goods and services produced by society.
Meanwhile, economic growth according to (Adisasmita, 2.
can be seen as an increase in living standards in industrialized countries, as well as economic development, welfare, progress, and long-term improvement.
Therefore, growing gross domestic product from year to year is a process of economic growth.
Usually, a country's GDP figure is used to measure economic growth.
Trade Openness Trade openness is the ratio of a country's GDP to the volume of products and services exported and imported from other countries.
The Organization for Economic Cooperation and Development (OECD) assesses global transaction relations in terms of the theoretical average of trade, or the amount of commodities and services exported and imported in relation to GDP, also known as trade openness.
According to the idea of absolute advantage, two countries can specialize in certain products by trading commodities with an absolute advantage for those at an absolute disadvantage if one country produces some commodities more effectively than others while being less efficient at producing others.
According to the theory of comparative advantage, two countries can still engage in profitable trade even when one is less efficient at producing a particular good.
This shows that the country does not have an absolute advantage.
In accordance with David Ricardo's thesis, trade can occur between countries if one has a comparative advantage over the other.
A country will have a comparative advantage if it can produce a lot of goods and services at a lower cost.
Government Spending Keynes explained efforts to increase aggregate supply and demand as a means to spur economic growth.
Spending by the government and households has been theorized to have short and long term effects on economic growth in the Keynesian model.
Spending both now and in the future can increase aggregate demand, but it is the latter that helps economic (Tapparan, 2.
Wagner's Law, an idea he coined in the 19th century, states that government spending affects economic growth.
the more advanced a country is economically, the more spending it Keynesian theory, a 20th century school of thought, argues that fiscal policy should be seen as an exogenous element in economic growth.
(Solikin, 2.
Labor Force Everyone of working age who is working or intending to work to provide goods or services to the public is considered to be of working age, regardless of whether they are working or not.
The labor force contributes to economic growth because it affects the level of production.
According to Todaro, increasing human capital rather than physical capital is a key component in the economic progress of western countries.
(Rusniati et al.
, 2.
The current workforce will change as a result of intermittent population growth.
The quality of the workforce must, however, come after the quantity of the workforce.
As a result, this situation can enhance economic development and manufacturing capabilities.
METHOD
The data used in this study includes panel data for 2015-2020 and cross-sectional data from eight ASEAN countries (Indonesia.
Malaysia.
Brunei Darussalam.
Thailand.
Singapore.
Vietnam, the Philippines, and Myanma.
Economic growth is the dependent variable, while the three independent factors are trade openness, government spending, and the workforce.
The data in this study were obtained from the World Bank.
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Identify The Effect Of Trade Openness.
Government Spending And Labor Force on Economic Growth IN ASEAN Countries PE = yu0 yu1 ycNycCycnyc yu2 ycEycEycnyc yu3 yayaycnyc yceycnyc = Economic Growth (%) = Trade Openness (%) = Goverment Expenditure (%) = Labor Force (%) = Error Term = cross section = time series in this study using the linear regression equation model in this research used the model suitability test, namely the Chow.
Hausman, and Lagrange Multiplier Tests.
The classic assumption test as an analytical tool in the regression model to assess the results of the regression which is the best estimation result and continued with the Normality test.
Heteroscedasticity Test.
Autocorrelation Test and Multicollinearity Test.
hypothesis testing in this study using the t test .
F test .
and the Coefficient of Determination Test.
RESULTS AND DISCUSSION
Analysis Results To determine whether FEM or CEM is better, that is looking at the probability value of the Chow test with the following hypothesis: Ho = CEM if pvaluedChi-square table> Chi-square value calculated.
Ha = FEM if value.
Chi-square.
table<value chi-square count.
Table 2.
Chow Test Results Effect Test Cross-section.
Cross-section.
Chisquare Statistic .
Prob.
0,0000
0,0000
Source: processed data .
Table 2 shows that the F and Chi-Square values have a significance level below 5% .
H0 is rejected and supports Ha FEM is the best for this research.
When deciding between the Fixed Effects and Random Effects models, the Hausman test is used.
The hypothesis is H0 = Random Effect, if the Chi-Square/table value > Chi-square value count Ha Fixed Effect, if Chi-square table <calculated Chi-square value.
Table 3.
Hausman Test Results Test.
Summary Crosection.
Chi-Sq.
Statistic Chi-Sq.
Prob.
0,0000
Source: Processed data .
Table 3 is used to select the Fixed Effect Model (FEM) because it produces a Chi-Squares value 094769 > Chi-Squares table of 7.
81, a probability value of 0.
0000 which is lower than the 5 percent significant limit.
The results of these two analyzes show that FEM has the best results.
Table 3 is used to select the Fixed Effect Model (FEM) because it produces a Chi-Squares value of 094769 > Chi-Squares .
81, a probability value of 0.
0000 is lower of the 5 percent significant limit.
The results of these two analyzes show that FEM has the best results.
To determine whether the residual values of the dependent variable and independent variables in https://equity.
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Identify The Effect Of Trade Openness.
Government Spending And Labor Force on Economic Growth IN ASEAN Countries the regression model are regularly distributed or not by carrying out a normality test.
Table 4 .
Normality Test Skewness Cross-section Jarque-Bera Prob.
0,157566
Source: Processed data .
Based on Table 4, the Jarque-Bera value = 3.
695825 < N2 table .
with a probability of 157566 > 0.
05, statistically the Fixed Effect model is a model with normally distributed data Table 5 .
Multicollinearity Correlation Detection Results 1,000000 -0,357205 -0,357205 1,000000 0,639406 -0,534296 0,639406 -0,534296 1,000000 Source: Processed data .
Table 5 shows that there is no multicollinearity in the regression model because there are no variables that have a correlation value of more than 0.
To check homoscedasticity or heteroscedasticity, namely whether the disturbance variables are normally distributed or not, the glejser technique is used for the heteroscedasticity test.
Table 6.
Heteroscedasticity Test Results Variable Coefficient aError t-Statistic Prob.
-0,043599
0,233604
0,128903
0,027787
0,324782
0,182829
-0,305423
-1,569067
0,719264
0,705047
0,7618
0,1254
0,4766
0,4853
Source: Processed data .
Referring to the data in Table 6.
Because the average of each dependent variable is greater than = 0.
05, it can be concluded from the regression findings that the FEM model used in this study is greater than .
%).
Figure 1 .
Autocorrelation Test Source: Processed data .
According to the Durbin-Watson test, the estimation result of 1.
757410 is neither negative nor positive, because it is between the dU .
and 4-dU .
U d4-dU).
Panel Data Regression Results https://equity.
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Identify The Effect Of Trade Openness.
Government Spending And Labor Force on Economic Growth IN ASEAN Countries Table 7.
Panel Data Regression Results Variable Error t-Statistic Prob.
0,116
0,045
0,472
0,282
0,046
0,015
0,001
Source: Processed data .
The t-test is used to rank the significance of each independent variable in relation to the dependent reject H0 and accept Ha if the p-value is less than or equal to 5%, or 0.
This shows that the independent variable has a strong relationship.
If the probability of accepting H0 on Ha is greater than 5% then H0 is accepted meaning that the independent variable has no significant interaction between the dependent and independent variables.
The probabilities and t-statistics can be compared with the values found in the t-tables.
The null hypothesis (H.
must be rejected if the t-statistic is greater than the t-table, which indicates that the independent variable has a large effect on the dependent variable.
However, if the t-statistic < from t-table, then Ho is accepted because there is no evidence that the independent variable has an effect on the dependent variable.
To determine the effect of independent factors on the dependent variable, we can use partial regression.
Table 8 .
T Test Variable t-statistics t-table Prob Conclusion Information Tolak H0 Signifikan Tolak H0 Signifikan Tolak H0 Signifikan Source: Processed data .
Trade Openness Variable The level of commercial openness is indicated by a t value of 2.
536 as shown in the table.
The ttable value of 1.
680 can be obtained using a significance level of 5% where n is the number of observations and k is the number of variables .
-4 = .
Moreover, we are for Ha and against Ho because 0.
015 is less than 0.
When viewed from the trade openness variable, the estimated lt value is .
> t table value .
This shows that when GDP growth is used as the dependent variable, trade liberalization has a positive relationship.
Trade openness impacts the ability of eight ASEAN countries to attract profitable investment from 2015 to 2020.
Government Spending Variable As shown in the table, the t value for the "government expenditure" variable is -4.
By using an alpha of 5% and degrees of freedom .
, where n is the number of observations and k is the number of variables, the t-table value is 1.
- 4 = .
Government expenditure has a negative relationship with GDP growth, which is indicated by aprobability value of 0.
0001 which is smaller than value = 0.
T table .
Government spending will have a substantial or appreciable negative effect on economic development in eight ASEAN countries between 2015 and 2020.
Seperti terlihat pada tabel, nilai t untuk variabel Aupengeluaran pemerintahAy adalah -4,312.
Labor Force Variable As can be seen in the table, the t-statistic for the "work force" variable is 3.
By using alpha 5% and degrees of freedom .
, n is the number of observations and k is the number of variables, the t table value is 1.
- 4 = .
The t value .
obtained by the work force t test is greater than the t value .
predicted https://equity.
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Identify The Effect Of Trade Openness.
Government Spending And Labor Force on Economic Growth IN ASEAN Countries by t table .
The labor force variable has a positive effect on the dependent variable of economic growth because the probability value of 0.
0012 is smaller than the value = 0.
Eight ASEAN countries had a good or very positive impact from investment between 2015 and 2020.
Table 9 .
Simultaneous Regression Coefficient Test (Test F) Df.
F-table F-statistics Prob.
Information .
0,05
0,000002
Ho rejected .
Source: Processed data .
If the F-statistic value .
exceeds the t-table .
, and the p-value .
is less 05, then we accept Ho and reject Ha, and we conclude that trade openness, government spending, and the labor force have a significant effect on growth.
economy in eight ASEAN countries between 2015 and 2020.
Analysis of the Coefficient of Determination (R 2 ) The coefficient of determination (R.
for the FEM (Fixed Effect Mode.
estimate is 0.
67625 or 62 percent, 67.
62% of the economic growth variable is influenced by trade openness, government spending, and the workforce, while 32.
38% is influenced by other.
So that the economic growth of the eight ASEAN countries is strongly correlated with trade openness, government spending, and the workforce.
2 Discussion Effect of Trade Openness on Economic Growth The projected value of trade openness is 0.
116, meaning that an increase in trade openness of 1 percent will lead to an increase in the economic growth of the 8 ASEAN countries by 0.
116 percent, other things being equal.
This finding further strengthens the theory that increasing ASEAN trade will boost the region's economy.
These results agree with previous research.
(Khoirul Ifa, 2.
, (R.
Purnomo, 2.
and (Saimul & Darmawan, 2.
trade increases the national economy significantly and profitably.
Along with the development of the current condition of globalization, it will continue to have an impact on the openness of a country's economy, which encourages integration between regions of the country.
this condition will continue to eliminate the boundaries between countries.
and this openness will continue to have an impact on increasing rapid economic flows between countries in a field such as trade, investment, and within a certain period of time can increase economic growth The Effect of Government Spending on Economic Growth The projected value of government spending is -2.
039, which indicates that an increase in government spending by 1 percent will result in a slowdown in economic growth in the 8 ASEAN countries by 2.
039 percent, other things being equal.
The Keynesian view that government spending can promote economic growth contradicts this finding.
This is because research shows that in 8 ASEAN countries, government expenditure is productive expenditure and is not accompanied by an increase in state income which has a negative impact on economic growth.
(Fitria, 2.
, (Kharisma & Pratikto, 2.
and (R.
Purnomo, 2.
Indonesia's economic growth has been impacted/negative, both in the short and long term, by the government's spending habits.
caused by the country's lack of ability to collect revenue from its budget in the long term.
The Effect of Labor Force on Economic Growth The projected value of the labor force is 3,497, which indicates that a 1 percent increase in the workforce will lead to a 3,497 percent increase in economic development in the 8 ASEAN countries, everything else being equal.
Labor participation has a strong and beneficial impact on economic growth, supporting previous findings.
(Tasrif et al.
, 2.
, (Setijawan et al.
, 2.
and (Afif & Ciptawaty, 2.
The expansion of the economy is directly proportional to the productivity of the labor force.
Therefore, higher output levels and stronger economic growth are associated with a more productive workforce and more new jobs are generated.
(S.
Purnomo, 2.
CONCLUSIONS AND SUGGESTIONS
Based on the results of data analysis and discussion, the following conclusions are obtained:
https://equity.
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Identify The Effect Of Trade Openness.
Government Spending And Labor Force on Economic Growth IN ASEAN Countries During the 2015-2020 period, trade openness as an independent variable has a positive and significant effect on economic growth in eight ASEAN countries.
This is because globalization has an impact on increasing the economic openness of a country and encouraging integration between regions within the country.
between 2015 and 2020, government spending has a major and negative influence on economic growth in eight ASEAN countries.
The slow effect of ASEAN government spending allocations on ASEAN's economic growth was cited as the cause.
The workforce will make a positive and significant contribution to economic growth in the eight ASEAN countries in 2015-2020 because the workforce is more productive and the main jobs created will increase production levels.
simultaneous test results show that employment, government spending, and trade openness have a major influence on economic growth in eight ASEAN member countries from 2015 to 2020.
SUGGESTIONS
Based on the results of the research, several suggestions related to this research can be conveyed.
Trade liberalization can boost economic growth in ASEAN countries.
To be able to compete with other countries, it is intended that the government provide facilities to the public and private sectors to optimize output.
In addition, the government can pay more attention to its human resources by offering various trainings to improve their own quality standards to produce competent human This is expected to support market effectiveness and increase product specialization.
Therefore, various ASEAN countries must take advantage of this trade openness to complement each other and boost productivity in their respective countries.
The government must be selective in absorbing and using sources of spending funds from the state Even though the distribution of funds is intended to improve people's welfare, if it cannot be used to increase the productivity of a country, it can have a negative impact on economic growth and has the potential to hinder economic progress.
The correlation between employment and economic growth is favorable.
The workforce must be more innovative in creating jobs to increase productivity, and the government must step in and provide support in the form of capital and training in order to create a workforce that is ready to be productive and qualified in various fields so that it can contribute to economic growth.
There are recommendations for expanding the study of the projected, short-term, and long-term consequences of trade opening on government spending and the labor force.
REFERENCE