Does Toll Road Operation Impact Wages and Unemployment? Evidence from Java Island
Article Sidebar
-
Difference in Differences, Infrastructure, Toll Road, Unemployment, Wage
Abstract
Research Originality – To address the empirical gap left by previous studies that focused primarily on regional growth and industrial productivity, this study evaluates the impact of toll roads on average wages and open unemployment rates. The analysis utilizes Labor Force Survey microdata and focuses specifically on Java Island, where the majority of the toll road in Indonesia operates.
Research objectives – This study uses difference-in-differences with variation in the treatment timing with data from regencies/cities in Java Island from 2010 to 2023.
Research methods – This study using difference in differences with variation in the treatment timing with data from regencies/cities in Java Island from year 2010 to 2023.
Empirical result – This study implies that construction of toll roads has positive and significant impacts to wages. Then, the construction of toll roads doesn’t have an impact on unemployment but shows a positive correlation in which the operation of toll road increases the unemployment in the area with toll.
Implications – The findings of the research suggest that the toll road can be maintained, and the government must anticipate the potential crowding out of workers shifting from the primary to the secondary sector due to wage increases in the latter.
Full text article
References
Abdullah, H. (2014). Realokasi kebijakan fiskal: Implikasi peningkatan human capital dan pembangunan infrastruktur terhadap pertumbuhan ekonomi dan kesejahteraan masyarakat. Jurnal Bina Praja, 6(2), 117–128. https://doi.org/10.21787/JBP.06.2014.117-128
Ahmad, F. S. (2022). Dampak pembangunan jalan tol Trans Jawa terhadap pertumbuhan ekonomi di Jawa Tengah. Jurnal Ekonomi Dan Kebijakan Pembangunan, 11(1), 1–18. https://doi.org/10.29244/jekp.11.1.2022.1-18
Anghel, M.-G., Anghelache, C., & Manole, A. (2017). The effect of unemployment on economic growth. Romanian Statistical Review, 65(7), 174–186. https://www.revistadestatistica.ro/supliment/wp-content/uploads/2017/07/rrss_07_2017_A8_en.pdf
Ardiyono, S. K., Parenrengi, N. P. A., & Faturachman, F. (2018). How does toll road impact accessibilities, trades, and investments in short term? A case study of Cipali toll road in West Java, Indonesia. Journal of Infrastructure Policy and Development, 2(2), 226. https://doi.org/10.24294/jipd.v2i2.673
Arumandani, A. (2022). Analisis dampak jalan tol terhadap ekonomi dan keuangan daerah [Universitas Indonesia]. https://psb.feb.ui.ac.id/index.php?p=show_detail&id=109100&keywords=
Autor, D. H., & Dorn, D. (2013). The growth of low-skill service jobs and the polarization of the US labor market. American Economic Review, 103(5), 1553–1597. https://doi.org/10.1257/aer.103.5.1553
Badan Pengatur Jalan Tol Kementerian Pekerjaan Umum dan Perumahan Rakyat. (2023). Laporan Tahunan Badan Pengatur Jalan Tol 2022: Peningkatan kualitas jalan tol melalui inovasi teknologi operasi dan pemeliharaan.
Badan Pusat Statistik. (2025). Upah rata-rata per jam pekerja menurut provinsi (rupiah/jam), 2025. Biaya Tenaga Kerja. https://www.bps.go.id/id/statistics-table/2/MTE3MiMy/upah-rata---rata-per-jam-pekerja-menurut-provinsi.html
Barro, R. J. (2001). Human capital and growth. American Economic Review, 91(2), 12–17. https://doi.org/10.1257/aer.91.2.12
Binswanger, H. P., Khandker, S. R., & Rosenzweig, M. R. (1993). How infrastructure and financial institutions affect agricultural output and investment in India. Journal of Development Economics, 41(2), 337–366. https://doi.org/10.1016/0304-3878(93)90062-R
Boarnet, M. G. (1997). Highways and economic productivity: Interpreting recent evidence. Journal of Planning Literature, 11(4), 476–486. https://doi.org/10.1177/088541229701100402
Callaway, B., & Sant’Anna, P. H. C. (2021). Difference-in-differences with multiple time periods. Journal of Econometrics, 225(2), 200–230. https://doi.org/10.1016/j.jeconom.2020.12.001
Card, D., & Krueger, A. (1993). Minimum wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania. The American Economic Review, 84(4), 772–793. https://doi.org/10.3386/w4509
Cloos, G. W. (1977). Business insights: Employment and unemployment. Economic Perspectives, 3(2).
Dabla-Norris, E., Kochhar, K., Ricka, F., Suphaphiphat, N., & Tsounta, E. (2015). Causes and consequences of income inequality: A Global perspective. https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/sdn/2015/_sdn1513.pdf
Dickens, W. T., & Lang, K. (1988). Labor market segmentation and the union wage premium. The Review of Economics and Statistics, 70(3), 527. https://doi.org/10.2307/1926795
Djumantara, R. H., & Wisana, I. D. G. K. (2025). The impact of the Trans Java toll road on industry micro small food and beverage sector. Oikonomia : Journal of Management Economics and Accounting, 2(3), 186–197. https://doi.org/10.61942/oikonomia.v2i3.371
Doerr, L., & Gaebler, S. (2022). Does highway access influence local employment? Evidence from German municipalities (Ifo Working Paper No. 377). https://www.ifo.de/DocDL/wp-2022-377-doerr-gaebler-highways-local-employment.pdf
Dube, A., Lester, T. W., & Reich, M. (2010). Minimum wage effects across state borders: Estimates using contiguous counties. Review of Economics and Statistics, 92(4), 945–964. https://doi.org/10.1162/REST_a_00039
Fakhruddin, A., & Gultom, Y. M. L. (2021). The impact of toll road construction on changes in built-up land (Case study of Trans Java toll road). Jurnal Geografi Lingkungan Tropik, 5(2). https://doi.org/10.7454/jglitrop.v5i2.125
Fan, S., Zhang, L., & Zhang, X. (2004). Reforms, investment, and poverty in rural China. Economic Development and Cultural Change, 52(2), 395–421. https://doi.org/10.1086/380593
Feenstra, R. C., & Hanson, G. H. (1997). Foreign direct investment and relative wages: Evidence from Mexico’s maquiladoras. Journal of International Economics, 42(3–4), 371–393. https://doi.org/10.1016/S0022-1996(96)01475-4
Foster, V., Gorgulu, N., Jain, D., Straub, S., & Vagliasindi, M. (2025). The impact of infrastructure on development outcomes: A Meta-analysis. The World Bank Research Observer. https://doi.org/10.1093/wbro/lkaf003
Fujita, M., Krugman, P., & Venables, A. J. (1999). The spatial economy: Cities, regions, and international trade. The MIT Press. https://doi.org/10.7551/mitpress/6389.001.0001
Gertler, P. J., Gonzalez-Navarro, M., Gračner, T., & Rothenberg, A. D. (2024). Road maintenance and local economic development: Evidence from Indonesia’s highways. Journal of Urban Economics, 143(1), 1-18. https://doi.org/10.1016/j.jue.2024.103687
Gibbons, S., Lyytikäinen, T., Overman, H. G., & Sanchis-Guarner, R. (2019). New road infrastructure: The effects on firms. Journal of Urban Economics, 110(1), 35–50. https://doi.org/10.1016/j.jue.2019.01.002
Goodman-Bacon, A. (2021). Difference-in-differences with variation in treatment timing. Journal of Econometrics, 225(2), 254–277. https://doi.org/10.1016/j.jeconom.2021.03.014
GRIPS Development Forum. (2003). Linking economic growth and poverty reduction: Large-scale infrastructure in the context of Vietnam’s CPRGS. https://gdforum.sakura.ne.jp/ja/pdf03/infra_paper/ENoverview.pdf
Hayakawa, K., & Tsubota, K. (2022). The Impact of highways on commodity prices: The Price of butter in Japan. Journal of Asian Economics, 81(1), 1–9. https://doi.org/https://doi.org/10.1016/j.asieco.2022.101503
Holl, A. (2016). Highways and productivity in manufacturing firms. Journal of Urban Economics, 93(1), 131–151. https://doi.org/10.1016/j.jue.2016.04.002
Hornstein, A., Krusell, P., & Violante, G. L. (2011). Frictional wage dispersion in search models: A quantitative assessment. American Economic Review, 101(7), 2873–2898. https://doi.org/10.1257/aer.101.7.2873
Khamis, M. (2013). Does the minimum wage have a higher impact on the informal than on the formal labour market? Evidence from quasi-experiments. Applied Economics, 45(4), 477–495. https://doi.org/10.1080/00036846.2011.605763
Khoirunurrofik, & Anas, T. (2023). Massive infrastructure development and its impact on Indonesia’s economy. In S. M. Indrawati, T. Anas, C. F. Ananda, & F. Zen (Eds.), Infrastructure for inclusive economic development vol.1: Lessons learnt from Indonesia (pp. 108–131). Economic Research Institute for ASEAN and East Asia (ERIA). https://www.eria.org/uploads/Infra_for_Inclusive_Eco_Dev_vol_1-Lessons_Learnt_from_Indonesia-rev_.pdf/
Lin, Y. (2017). Travel costs and urban specialization patterns: Evidence from China’s high speed railway system. Journal of Urban Economics, 98(1), 98–123. https://doi.org/10.1016/j.jue.2016.11.002
Lindgren, E., Pettersson-Lidbom, P., & Tyrefors, B. (2021). The Causal effect of transport infrastructure: Evidence from a new historical database (IFN Working Paper, No. 1407). https://www.econstor.eu/bitstream/10419/247889/1/wp1407.pdf
Mazar, Y. (2014). The Development of wages in the public sector and their connection with wages in the private sector (Discussion Paper No. 2014.03). https://www.boi.org.il/media/hysc1dny/dp201403e.pdf
Montolio, D. (2018). The Effects of local infrastructure investment on crime. Labour Economics, 52(1), 210–230. https://doi.org/10.1016/j.labeco.2018.02.006
Nanda, A. D. (2023). Jalan tol: Perkuat konektivitas negeri, meningkatkan pertumbuhan ekonomi. Retrieved from https://www.djkn.kemenkeu.go.id/artikel/baca/16094/Jalan-Tol-Perkuat-Konektivitas-Negeri-Meningkatkan-Pertumbuhan-Ekonomi.html.
Nawaz, S., Anwar, S., & Iqbal, N. (2021). The Spatial effects of road infrastructure on employment in Pakistan: Quantifying the role of complementary factors. The Pakistan Development Review, 60(3), 309–330. https://doi.org/10.30541/v60i3pp.309-330
Negi, V., & Akhter, S. (2022). Impact of labour laws on wage differentials between formal and informal sectors: Evidence from the Indian manufacturing sector. Asian Journal of Economics, Business and Accounting, 22(22), 83–98. https://doi.org/10.9734/ajeba/2022/v22i2230712
Nouri, M. N., Gugun Muhammad, F., & Muhammad Daffa, M. (2024). Dampak Pembangunan Jalan Tol Trans Jawa terhadap Peluang Kewirausahaan. EDUSAINTEK: Jurnal Pendidikan, Sains Dan Teknologi, 11(3), 1129–1146. https://doi.org/10.47668/edusaintek.v11i3.1207
Octaviano, D., & Yudhistira, M. H. (2024). Dampak pembangunan jalan Tol Trans Jawa terhadap produktivitas industri manufaktur daerah kabupaten/kota. Jurnal Penelitian Transportasi Darat, 26(2), 111–119. https://doi.org/10.25104/jptd.v26i2.2267
Paramitasari, N., Khoirunurrofik, K., Mahi, B. R., & Hartono, D. (2024). Charting vocational education: Impact of agglomeration economies on job–education mismatch in Indonesia. Asia-Pacific Journal of Regional Science, 8(2), 461–491. https://doi.org/10.1007/s41685-024-00333-x
Petek, D., & Jagric, T. (2017). Wage inequalities: A Result of different levels and fields of tertiary education? Management, 12(1), 59–73. https://doi.org/10.26493/1854-4231.12.59-73
Putra, A. P. (2023). Impact of toll road development on modern retail growth in Indonesia. Journal Research of Social Science, Economics, and Management, 2(8), 1759–1778. https://doi.org/10.59141/jrssem.v2i08.407
Sa’diah, M., & Khoirunurrofik, K. (2025). The Relationship between special economic zones and economic growth and welfare: Empirical evidence from regencies and cities in Indonesia. Indonesian Treasury Review: Jurnal Perbendaharaan, Keuangan Negara dan Kebijakan Publik, 10(2), 173-187. https://doi.org/10.33105/itrev.v10i2.1098
Sahli, M., & Hazari, B. R. (2005). Tourism, employment and national welfare. Asia-Pacific Journal of Accounting & Economics, 12(2), 155–164. https://doi.org/10.1080/16081625.2005.10510656
Strauss, H., & de la Maisonneuve, C. (2009). The Wage premium on tertiary education. OECD Journal: Economic Studies, 2009(1), 1–29. https://doi.org/10.1787/eco_studies-v2009-art7-en
United Nations Development Programme. (2016). Human Development Report 2016: Human development for everyone. Retrieved from https://hdr.undp.org/system/files/documents/2016humandevelopmentreportpdf1pdf.pdf
Verico, K., & Qibthiyyah, R. M. (2023). Indonesia’s infrastructure and inclusive economic growth. In S. M. Indrawati, T. Anas, C. F. Ananda, & F. Zen (Eds.), Infrastructure for inclusive economic development vol.1: Lessons learnt from Indonesia (pp. 19–51). Economic Research Institute for ASEAN and East Asia (ERIA).
Wauthy, X., & Zenou, Y. (1997). Compensating wage differentials, workers’ heterogeneity and imperfect competition in the labor market (LIDAM Discussion Papers IRES 1997003).
Wihardja, M. M., & Cunningham, W. (2021). Pathways to middle-class jobs in Indonesia. Retrieved from https://documents1.worldbank.org/curated/en/891451624897518888/pdf/Technical-Report.pdf
Yamauchi, F. (2016). The Effects of improved roads on wages and employment: Evidence from rural labour markets in Indonesia. The Journal of Development Studies, 52(7), 1046–1061. https://doi.org/10.1080/00220388.2015.1121242
Zhang, X., Hu, Y., & Lin, Y. (2020). The Influence of highway on local economy: Evidence from China’s Yangtze River Delta region. Journal of Transport Geography, 82(1), 1–16. https://doi.org/https://doi.org/10.1016/j.jtrangeo.2019.102600
Authors
Copyright (c) 2026 Indonesian Treasury Review: Jurnal Perbendaharaan, Keuangan Negara dan Kebijakan Publik
This work is licensed under a Creative Commons Attribution 4.0 International License.
Copyright notice can be accessed here