The effect of knowledge spillovers and human capital through technological intensity on employment growth in Indonesia

This study estimates the effects of externalities of agglomeration in the form of knowledge spillovers (Marshall–Arrow–Romer/job specialization, Jacobs/diversity, and Porter/competition) and of externalities obtained from human capital on employment growth based on the technological intensity in an industry. We employed the data of International Standard Industrial Classification of all Economic Activities two-digit numerical codes for manufacturing industries at the level of districts and cities in Indonesia in 2010 and 2015 and ran the estimation model using ordinary least squares. The results show that while employment growth is constrained by specialization, it is complied by diversity though it is statistically insignificant across technological intensity in the industry. Competition has negative effects on both low- and medium–low-technology industries; however, it has positive effects on high-technology industries. Additionally, human capital negatively affects low-technology industries, while it positively affects medium–low and high-technology industries.