Gender Gaps and Real Interest Rates in Indonesian Unemployment Dynamics

Abstract

This study investigates the short- and long-run relationships between male–female gaps in labor force participation and wages, real interest rates, and unemployment in Indonesia. Using annual data for 1991–2023, the analysis employs an autoregressive distributed lag (ARDL) approach and an error correction model to examine long-run relationships and short-run dynamics. The bounds test indicates a long-run relationship among the variables. In the long run, the labor force participation gap is positively and significantly associated with unemployment, while the wage gap has a positive but statistically insignificant coefficient. Real interest rates exhibit a negative and statistically significant association with unemployment. In the short run, the wage-gap coefficient is statistically insignificant. The negative and significant error correction coefficient indicates that approximately 41.65% of deviations from long-run equilibrium are corrected each year. These findings highlight the relevance of disparities in labor force participation and macroeconomic conditions to unemployment dynamics in Indonesia. The study provides an empirical basis for considering barriers to women’s labor market participation alongside broader employment conditions when developing inclusive labor market policies