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All Journal International Journal of Economics, Business and Innovation Research
Farida Rahmawati
Department of Development Economics, Universitas Negeri Malang, Malang, Indonesia
Decision Sciences, Operations Research & Management Economics, Econometrics & Finance

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Labor Absorption in Gerbangkertosusilo Plus: Mediating Effects of Firm Numbers on Regional Employment Dynamics Fajar Firmansyah; Farida Rahmawati
International Journal of Economics, Business and Innovation Research Vol. 5 No. 05 (2026): International Journal of Economics, Business and Innovation Research( IJEBIR)
Publisher : Cita konsultindo

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.63922/ijebir.v5i05.6491

Abstract

Industrial agglomeration is expected to stimulate economic activity and employment; however, the Gerbangkertosusilo Plus (GKS Plus) area, the main industrial hub of East Java Province, continues to experience an unemployment rate above the national average. This study investigates the determinants of labor absorption in the GKS Plus agglomeration area by examining both direct and indirect effects through the mediating role of the number of firms. A quantitative causal research design was employed using panel data from ten cities and regencies in the GKS Plus area covering the 2017–2024 period. Panel data regression with a path analysis framework was applied to estimate the relationships among variables, while the Sobel test was used to assess the significance of indirect effects. The estimated results indicate that industrial sector GRDP, government capital expenditure, and the agglomeration index are significant determinants of labor absorption, both through direct relationships and through indirect pathways mediated by the number of firms. This study provides new insights into how economic factors affect labor absorption through the mediating role of the number of manufacturing firms. The research also offers analytical novelty by expanding the scope of the Gerbangkertosusilo agglomeration area from the conventional seven regions to ten cities and regencies. These findings highlight the importance of maintaining industrial diversification while regulating the growth of firms within environmental carrying capacity to reduce excessive competition, pollution, congestion, and rising land costs, thereby sustaining the positive employment effects of industrial agglomeration. Keywords: Agglomeration, Business Entities, Employment, Industry.
Co-Authors Fajar Firmansyah