The Impact Of Economic Pillar Sdgs Indicators On Labor Productivity In Indonesia: A Vecm Approach

This study aims to examine the effects of Sustainable Development Goals (SDGs) economic pillar indicators—namely the electrification ratio, manufacturing industry growth, income inequality, and Foreign Direct Investment (FDI)—on labor productivity in Indonesia over the period 2015–2024. The research adopts an explanatory quantitative approach using annual time-series data analyzed through a Vector Error Correction Model (VECM). The findings reveal that, in the short run, only the electrification ratio has a statistically significant effect on labor productivity, exhibiting a negative relationship. In the long run, both the electrification ratio and manufacturing industry growth exert negative and significant effects, whereas income inequality shows a positive and significant impact. FDI does not demonstrate a significant effect on labor productivity. Impulse Response Function (IRF) and Forecast Error Variance Decomposition (FEVD) analyses indicate that labor productivity dynamics are predominantly driven by internal factors, with the largest external contribution originating from the manufacturing sector. These findings imply that enhancing labor productivity requires structural transformation, improvements in the quality of energy utilization, and more equitable development. The novelty of this study lies in the application of SDGs economic pillar indicators within a VECM framework and the integration of equity and sustainability perspectives in development analysis.