Economic Growth, Unemployment, and Income Inequality in Sulawesi: A SEM-PLS Analysis of Regional Development Dynamics

International Journal of Economics and Management Studies

© 2025 by SSRG - IJEMS Journal

Volume 12 Issue 9

Year of Publication : 2025

Authors : Ahmad, Muhamad Armawaddin, Fajar Saranani, La Ode Samsul Barani, La Tondi, Rendy Hidayat, Erwin

10.14445/23939125/IJEMS-V12I9P106

How to Cite?

Ahmad, Muhamad Armawaddin, Fajar Saranani, La Ode Samsul Barani, La Tondi, Rendy Hidayat, Erwin, "Economic Growth, Unemployment, and Income Inequality in Sulawesi: A SEM-PLS Analysis of Regional Development Dynamics," SSRG International Journal of Economics and Management Studies, vol. 12,  no. 9, pp. 63-72, 2025. Crossref, https://doi.org/10.14445/23939125/IJEMS-V12I9P106

Abstract:

This study investigates the relationship between Gross Regional Domestic Product (GRDP), Unemployment, and income inequality in six provinces of Sulawesi during 2010–2022 using Structural Equation Modeling–Partial Least Squares (SEM-PLS). The model employs a regional reflective approach, where provincial indicators represent latent constructs of growth, labor market performance, and Inequality. Bootstrapping results show that GRDP significantly reduces Unemployment, though with modest effect sizes, supporting Okun’s Law. Unemployment positively influences Inequality, indicating labor market exclusion as a key determinant of income disparity. GRDP also directly affects Inequality, but the coefficient magnitude is negligible, consistent with the Kuznets Hypothesis. The model explains 59.1% of unemployment variance and 84.4% of inequality variance, underscoring its explanatory power. Findings suggest that growth alone cannot guarantee inclusivity without policies promoting job creation, skill development, and equitable opportunity distribution. Limitations include the exclusion of other determinants and a focus on Sulawesi alone. Future research should extend the framework to other regions of Indonesia and incorporate additional variables.

Keywords:

GRDP, Unemployment, Inequality, SEM-PLS, Sulawesi, Inclusive growth.

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