ANALYSIS OF OPEN UNEMPLOYMENT RATE IN WEST JAVA: GMM APPROACH

The study aims of this research is to determine the model and the short-term and long-term effects of the Labor Force Participation Rate (LFPR), Human Development Index (HDI), Minimum County/City Wage (MCW), and Regional Gross Domestic Product (RGDP) on the Open Unemployment Rate (OUR) in West Java from 2018-2023. The method used is dynamic panel data regression based on the Generalized Method of Moments (GMM), specifically utilizing the optimal First-Difference (FD-GMM) and System GMM (SYS-GMM) models to produce consistent, efficient, and unbiased results. The research findings indicate a significant negative effect of LFPR on OUR, both in the short and long term. An increase in LFPR does not always reduce unemployment, especially if not accompanied by adequate job creation and skills matching. HDI and MCW did not have a significant effect on OUR, in both the short and long term. Although increases in HDI and MCW are expected to reduce unemployment, other factors such as skills gaps and the capacity of companies to absorb labor also play a significant role. RGDP had a significant positive effect on OUR, both in the short and long term. High economic growth, while expected to absorb labor, does not automatically reduce unemployment. Other factors such as economic structure and the quality of human resources also influence unemployment rates. Therefore, unemployment reduction strategies in West Java must be holistic, considering the interaction between these macroeconomic factors. The government needs to focus on creating quality jobs, vocational training, and balanced MCW policies. Improving the HDI through investment in education and health is also crucial for reducing long-term unemployment. This research is expected to serve as a reference for further macroeconomic development research on reducing unemployment rates.