The Effect of Wages, Infrastructure, and Political Stability on Foreign Investment in Indonesia

Abstract

The aim of the this research is to examine the impact of wages, infrasrtructure, and political stability on foreign investment in Indonesia. The data used is secondary data in the form of panel data covering 34 province in Indonesia from 2017 to 2021. Dynamic panel regression estimation is used in this work to analyze statistical data using Stata 13 and Eviews 10 software. According to the study’s partial findings wages have positive effect but not significantly on foreign investment in short and long term. In addition, infrastructure has a positive and significant impact on foreign investment both the long and short term. Meanwhile political stability was found to have a negative but insignificant effect on foreign investment, both in short and long term. However, wages, infrastructure, and political stability simultaneously have a significant effect on foreign investment in Indonesia. Therefore, according to this study, the government must continue to increase infrastructure development. In addition, workers and employers must take into account their needs when setting wage rules. Even though the nation is in a dynamic condition, another component that must be considered is related to a solid democracy.