THE IMPACTS OF FINAL DEMAND OF INDONESIA’S EXPORTED PRODUCTS ON DOMESTIC INCOME AND EMPLOYMENT

The conventional trade statistics may lead to an incomplete interpretation on the importance of international trade, due to its recording system and the increasing globalization of production process. The global value chain approach and the World Input Output Table were employed. This paper aims to estimate the extent to which Indonesia's economy relies on the final demand of the particular export market in term of generating incomes and employment when the fragmentation of global production exists. The results show that value added and employments induced by final demand in advanced economies are higher than those generated by final demand in developing economies. Enhancing production integration within the same region (East Asia or ASEAN) can be an effective strategy to induce higher Indonesia's income and employment directly and indirectly.