Indonesia Conference Directory

Indonesia which classified to developing country has a particular characteristic in low productivity level of input labor. The gap of economic growth between developing and developed countries become higher. Since then, all of the developing countries want to reach convergence with developed countries. The productivity level is a major key to accelerate the rate of economic growth in every country. The purpose of this research is to know the influence of Total Factor Productivity (TFP) towards economic growth in Indonesia both short-term and long-term periods of 1994-2017. The analytical method which used in this research is Error Correction Model (ECM). Error Correction Model (ECM) is used to analyze economic growth both in the short term and in the long term. Estimation results show that in the short-term both the variable capital accumulation, the regional minimum wage and total factor productivity growth affect Indonesias economic growth but in the long-term, there are two variables that influence positive that are insignificant investment, the Regional Minimum wage affects economic growth in Indonesia. And Total Factor Productivity growth in the long-term have a positive and significant influence on economic growth in Indonesia. Thus, it can be concluded that Total Factor Productivity is the main determining factor affecting economic growth in Indonesia.