SPATIAL MULTIPLIERS AND LINKAGES IN INDONESIAN ECONOMY: AN INTER-ISLAND INPUT-OUTPUT ANALYSIS.

This paper calculated spatial multipliers, flow-on effects and linkages in Indonesian economy that can be used for planning, evaluation and control purposes for both at national and regional development. Using hybrid procedure, inter-island input-output model for Indonesia has been constructed. Spatial multipliers, flow-on effects and spatial linkages were then calculated. The results show that, firstly, all measures of spatial-specific multipliers (output, income and output) indicated that the percentage of multipliers that occurred in the own-region is significantly high. For the island of Sumatra and Java the percentage of output, income and employment multipliers that occurred in the own region were about 90 per cent indicating that the two islands were relatively spatially independent. Only a small proportion of inputs from the rest of the country were required in producing goods and services in those islands. For other three groups of islands, the Kalimantan Island, the islands of Nusa Tenggara and Other islands, the percentage of multiplier effects in own-region ranged from 70 to 80 per cent of total multiplier effects. Secondly, the flow-on effects, by which the net-impact of change in final demand is measured, provides more accurate measures than that of total. On the lists of the ten largest ranking spatial sectors, the same sectors as those in output multipliers also emerged in output flow-on rank order. Finally, the spatial linkage analysis consistently confirms that the island of Sumatra and the island of Java were more independent with weak spatial linkages. A large proportion of multipliers or flow-on effects would occur in the own-region if the changes of final demand occurred in those islands. Focusing economic activities on these islands would increase the economic growth of the country, but at the same time would make the economic distribution among regions worse.