The Influence of Export, Government Expenditure, and Labor Force
to Economic Growth in North Sumatera
Malem Ateta Br. Purba
1
, Muhammad Fitri Rahmadhana
2
, and Muhammad Nasir
2
Student of Post Graduated Program, Universitas Negeri Medan, Medan Indonesia
2
Universitas Negeri Medan, Medan Indonesia
Keywords: Economic Growth, Export, Government Expenditure, Labor Force
Abstract: Economic growth is one of the most important factors to measure the success of economic development.
The aim of economic development is to achieve high economic growth, maintain price stability, and
overcome unemployment problems, maintain balance of payments balance and distribute income more
equitably and evenly. The purpose of this study was to look at the effects ofm exports, government
spending, and the workforce that worked on economic growth in North Sumatra during the period 2003-
2017. This study uses secondary data obtained directly from Badan Pusat Statistik and department or agency
concerned. The analysis used descriptive quantitative analysis of Ordinary Least Square (OLS). In this study
using Eviews 9 as an estimation tool. The regression showed that the Export is not significant positive effect
on the economic growth, Government Expenditure is significantly positive effect on the economic growth,
and Labor Force is significantly positive effect on the economic growth. Then the relationship between the
Export, Government Expenditure, and the Labor Force with Economic Growth of 98.03% and 1.97% is
explained by other factors not mentioned in this model.
1 INTRODUCTION
Economic growth is one of the most important
factors to measure the success of economic
development. Economic growth shows the extent to
which economic activity is able to generate
additional income in a certain period (Sukirno:
2008).
Economic growth is the development of
economic activities that have an impact on
increasing the amount of production of goods and
services produced by the community, and
encourages the increasing prosperity of the
community. Increased economic growth is a top
priority for regional governments. In the success of
economic growth, employment opportunities,
reducing poverty, improving nutrition and health,
including education will improve.
Positive economic growth shows that people who
are in a country have been able to fulfill their basic
needs and have even been able to obtain welfare. In
contrast, declining economic growth shows that the
condition of people's welfare also declined in the
country.
The aim of economic development is to achieve
high economic growth, maintain price stability, and
overcome unemployment problems, maintain
balance of payments balance, and distribute income
more equitably and evenly. According to Todaro
(2000), development must be interpreted as a
multimensional process involving major changes in
social structure, familiar mental attitudes and
national institutions including acceleration
(acceleration of economic growth, reduction of
inequality and the eradication of absolute poverty).
According to Simon Kuznets, economic growth
is a long-term increase in the ability of a country to
provide more economic goods to its population.
Based on the open economy concept, where
economic growth is an aggregate of household
sector consumption, investment, government sector
expenditure, and foreign trade in the import-export
sector (Y = C + I + G + NX).
North Sumatra is one of the largest provinces in
Indonesia and has abundant potential resources.
628
Purba, M., Rahmadhana, M. and Nasir, M.
The Influence of Export, Government Expenditure, and Labor Force to Economic Growth in North Sumatera.
DOI: 10.5220/0009510206280633
In Proceedings of the 1st Unimed International Conference on Economics Education and Social Science (UNICEES 2018), pages 628-633
ISBN: 978-989-758-432-9
Copyright
c
2020 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
Below is presented data on the comparison of North
Sumatra's economic growth with Indonesia's
economic growth during the 2011-2017 period.
Table 1: Comparison of North Sumatra's economic
growth with Indonesia's economic growth
Years
North Sumatera
Economic Growth
(%)
Indonesian
Economic
Growth (%)
2011
6.63
6.44
2012
6.45
6.19
2013
6.07
5.56
2014
5.23
5.02
2015
5.10
4.79
2016
5.18
5.02
2017
5.12
5.10
From Table above, it can be seen that the
economic growth of North Sumatera has decreased
from year to year unless it is known that 2016 has
increased. The economic performance of North
Sumatera in 2016 when compared to 2015, grew by
5.18%. the increase was due to the fact that most
businesses also experienced good growth. However,
North Sumatera's economic growth is above the
average economic growth in Indonesia.
In 2016 North Sumatera's export volume reached
8.39 million tons with exports reaching US $ 7.77
billion. The main export commodity of North
Sumatra is vegetable oil and animal fats which
reached US $ 2.99 billion (38.48% of the export
value of US $ 7.77 billion)
North Sumatera is the fourth province with the
largest population in Indonesia after West Java, East
Java and Central Java. According to the results of
the census carried out in 2010 in May, the
population of North Sumatera reached 12,982,204
people with population coverage reaching 188
people per km². The population growth rate of North
Sumatra during the period of 2000-2010 reached
1.12% per year. The labor force participation rate in
North Sumatera shows fluctuations.
2 THEORICAL FRAMEWORK
Economic growth
Harrod-Domar”s theory in Dornbusch and Fisher
(2004) this economics theory analyzes the
relationship between growth level and inflation
level. The idea is that at a certain level of national
income is sufficient to absorb all workers, with wage
level in the next period would no longer sufficient to
absorb all the existing all workers. The occurs
because of the additional production capacity in the
initial period and available in the following period.
Thus required the additional funds to achieve the
absorption level of full employment in the next
periode, by calculating the relationship between
capital (capital stok = K), with the production result
(output = Y), or with a capital output ratio (COR).
Economic growth is one of the most important
indicators in carrying out an analysis of economic
development that occurs in a country. Economic
growth is one process where the production capacity
of an economy increases over time to produce
increasingly large levels of income (Todaro: 2006).
According to Lincolin Arsyad (2010), economic
growth is an increase in GDP / GNP regardless of
whether the increase is greater or smaller than the
population growth rate, or whether changes in
economic structure occur or not.
According to Sukirno, (2004), that economic
growth explains or measures the achievement of the
development of an economy, whereas in
macroeconomic analysis the level of economic
growth achieved by a country is measured by the
development of real national income achieved by a
country.
Export
In macroeconomic theory, the relationship between
exports with the level of economic growth or
national income is an identity equation because
exports are part of the national income level
(Oiconta, 2006). From the point of the expenditure,
exports are one of the most important factors in the
Gross National Product (GNP) so that with a change
in the value of exports, in income of te community
directly will also undergo changes. On the other
hand, higher a country”s exports would cause the
economy will be very sensitive to the fluctuations in
the international markets and the world economy
(Irham and Yogi, 2003).
Exports are an outflow of goods and services
from one country to the international market.
Exports occur because the need for certain goods or
services is sufficient in the country or because the
production of goods / services can be competitive
both in price and quality with similar products in the
international market.
According to Todaro (2006), exports are
international trade activities that provide stimuli to
foster domestic demand which causes the growth of
large industries, along with a stable political
structure and flexible social institutions. In other
words, exports reflect trade activities among nations
that can provide a boost in the dynamic growth of
international trade, so that a developing country is
likely to achieve economic progress as well as with
more developed countries.
The Influence of Export, Government Expenditure, and Labor Force to Economic Growth in North Sumatera
629
Government Expenditures
According to Guritno (2001), government
expenditure is the value of spending carried out by
the government that is used for the benefit of the
community. Government expenditure reflects
government policy, where if the government has
written a policy to buy goods and services,
government expenditure reflects the costs that must
be spent by the government to implement the policy.
Government routine expenditures are
expenditures for the maintenance or administration
of daily government. Included in routine expenditure
are employee expenditure, goods expenditure,
autonomous regional subsidies, interest and other
debt repayments.
Development expenditure is an expenditure
intended to finance development programs, so that
the budget is always adjusted to funds mobilized.
These funds are then allocated to various fields in
accordance with the priorities planned in Repelita. In
addition to financing sectoral expenditures through
development departments or agencies, it also
finances regional special projects known as the
Inpres (Presidential Instruction) projects, both
carried out by the center and each region.
Labor Force
According to Todaro (2000), population growth and
labor force growth is traditionally regarded as one of
the positive factors that accelerate economic growth.
The grater amount of labor means will increase the
level of production, while the greater population
growth means a larger size of its domestic market.
Lewis in Todaro (2004) the homogeneous and
unskilled labor force is considered to be able to
move and shift from the traditional sector to the
modern sector smoothly and in limited quantities.
These circumstances, labor supply contains a high
elasticity. Increased demand for labor (from the
traditional sector) root in the expansion of modern
sector activities. Thus one of the factors that
influence the economic growth is labor.
Conceptual framework
Based on the above theoretical concepts, the
conceptual framework of the research can be
described, namely:
Figure 1: Conceptual Framework
Hypothesis
The hypothesis is a temporary answer to an existing
problem. This means that the existing hypothetical
does not mean the final answer, but becomes a
temporary conclusion that must be tested with data
that has a relationship, or by looking at the facts that
occur in the field.
The hypotheses in this study are:
a. Exports have a positive effect on North
Sumatra's economic growth
b. Government spending has a positive effect on
North Sumatra's economic growth
c. The labor force that works has a positive effect
on the economic growth of North Sumatra
3 RESEARCH METHOD
This study focuses on the economic growth of North
Sumatra Province. Where the independent variables
are exports, government expenditure, and labor
force. Whereas GDP at the constant price of 2010 is
the dependent variable.
The type of data used in this study is secondary
data in the form of quantitative time series, namely
data in the form of numbers and data sources
obtained through the report of the Central Sumatra
Provincial Statistics Agency (BPS), Bank Indonesia
and other supporting data obtained from journals,
books and previous research.
The operational limits of this research are carried
out by observing the effect of exports, government
spending and the labor force on economic growth in
North Sumatra. The data analysis method used in
this study is the Ordinary Least Square (OLS)
method. Where this method is used to obtain
estimates from a regression line by minimizing the
number of squares of errors for each observation of
the line (Kuncoro, 2007). This method is used in
analyzing the effect of independent variables on the
dependent variable with the following equation:
Y = α + β1X1 +β2X2 + β3X3 + e
Where :
α = constant
β1, β2, β3 = coefficient of each variable
X1 = export
X2 = government expenditure
X3 = labor force
e = error term
Export
Expenditure
Government
Labor
Force
Economic
Growth
UNICEES 2018 - Unimed International Conference on Economics Education and Social Science
630
4 ANALYSIS
1. Linear regression
From the results of multiple linear regression
analysis using the OLS method, an equation model
can be drawn for the effect of exports, government
expenditure, and the labor force on economic growth
in North Sumatra.
Table 2 : The Results of Linear Regression Analysis
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
35597.71
64772.97
0.546258
0.5173
EKSPOR
242.4329
240.2548
1.009066
0.3246
AK
0.039310
0.015365
2.558381
0.0266
PP
21.50248
2.062032
10.91277
0.0000
R-squared
0.980399
Mean dependent var
323022.8
Adjusted R-squared
0.972768
S.D. dependent var
82517.87
S.E. of regression
13617.13
Akaike info criterion
22.09922
Sum squared resid
2.04E+09
Schwarz criterion
22.28804
Log likelihood
-
161.7442
Hannan-Quinn
criter.
22.09721
F-statistic
167.7021
Durbin-Watson
stat
1.741370
Prob(F-statistic)
0.000000
Based on the data obtained from the results of the
research and the data that has been processed using
the Eviews 9 program, the regression results can be
obtained as follows:
Y = 35597.71 + 242.4329 X1 + 22.50248 X2 +
0.039310 X3
From the regression equation above, an
interpretation of the model can be made as follows:
a. The regression coefficient for the export variable
is 242.4329, so it can be said that the export variable
has a positive effect on economic growth in North
Sumatra. Judging from the probability value of
0.3246 where the probability value > α = 0.05, it can
be stated that the export variable does not
significantly influence economic growth in North
Sumatra.
b. Regression coefficients for government
expenditure variables are 22.50248, it can be said
that government expenditure variables have a
positive effect on economic growth in North
Sumatra. Judging from the probability value of
0.0000, because the probability value is < α = 0.05,
it can be stated that the variable government
expenditure has a significant effect on economic
growth in North Sumatra.
c. The regression coefficient for the labor force
variable (AK) is 0.039310, it can be stated that the
labor force variable has a positive effect on
economic growth in North Sumatra. Judging from
the probability value for this variable is 0.0266,
The Influence of Export, Government Expenditure, and Labor Force to Economic Growth in North Sumatera
631
because the probability is < α = 0.05, it can be stated
that labor force variables significantly influence
economic growth in North Sumatra.
2. Determination Coefficient (R-Square / R²)
Table 3 : The Results of R-Square
R -Square
Adjusted R-Square
0.980399
0.972768
Based on the table above, the value of is
0.980399. this indicates that the independent
variables together were able to give an explanation
of the dependent variable at 98.03%. The 1.97% is
explained by other variables outside the model.
3. T-test (Partial Test)
Table 4: The Results of T-Test
No
Explanatio
n
t-count
Sig.
1
Export
1.0090
66
0.3246
2
Governme
nt Expenditure
10.912
77
0.0000
3
Labor
Force
2.5583
81
0.0266
4. F-Statistic Test (Overall Test)
This test looks at how much influence the variable
X1 (Export), X2 (Government Expenditures), and
X3 (Labor Force that works) together on variable Y
(Economic Growth North Sumatra).
Table 5: The Result of F-Statistic Test
F-count
Si
g
167.7021
0.
0000
Based on the results of the regression model analysis
above, it can be seen that F-count > F-table
(167.7021> 3.20), then Ho is rejected and Ha is
accepted. This means that together the variables of
Export, Government Expenditures and Labor Force
that work significantly influence the Economic
Growth of North Sumatra at α = 5%.
5 CONCLUSION
1. Export has a positive and insignificant effect on
economic growth in North Sumatra. Where every
increase of Rp. 1 billion total exports resulted in
an increase in economic growth of Rp. 242.4329
billion assuming ceteris paribus.
2. Government expenditure has a positive and
significant effect on economic growth in North
Sumatra. Where every increase of Rp. 1 billion
total government expenditure resulted in an
increase in economic growth of Rp. 22.50248
billion assuming ceteris paribus.
3. The labor force that works has a positive and
significant effect on economic growth in North
Sumatra. Where each increase of 1 laborforce
that work is resulting in an increase in economic
growth of Rp. 0.039310 billion assuming ceteris
paribus.
6 RECOMMENDATION
Seeing the condition of Indonesia's economic
growth, especially North Sumatra, so that it will
improve in the future, the authors provide the
following suggestions:
1. In increasing economic growth in North
Sumatra, macroeconomic indicators such as
exports, government expenditures and the labor
force must also improve.
2. In supporting export growth, government and
private financial institutions must be able to
channel loans to the right real sectors, especially
the agricultural sector, small and medium
industries, and other sectors that are export-
oriented.
3. In improving the quality of the labor force,
government and private institutions must be
able to provide training and experience to the
laborforce so that their production results are
more productive.
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