Growth in Indonesia's manufacturing sectors: Urban and localization contributions

This paper examines the factors influencing the growth of four dominant and growing manufacturing sectors in Indonesia. The main purpose of this paper is to discriminate between localization economies and urbanization processes and their contributions to growth in selected manufacturing sectors in Indonesia. A secondary purpose is to identify the characteristics of local places that facilitate or hinder economic growth in the manufacturing sectors. We conclude that the studied manufacturing sectors benefit from localization economies, but that urbanization is largely not a contributor to growth in manufacturing. This suggests that new and geographically‐isolated growth poles are probably not a viable growth option for Indonesia's manufacturing sector. Rather, decreasing the economic distance between vertically and horizontally‐linked firms would be more conducive to growth.