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Economic Geography of Small and Cottage Industrial
Clusters in Java Island Indonesia
Mudrajad Kuncoro
Professor in Economics, Faculty of Economics and
Business, Gadjah Mada University, Yogyakarta,
Indonesia
Email:
profmudrajadk@gmail.com; URL:
http://www.mudrajad.com.
Accepted 14 January, 2013
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This paper showed that industrial district theory,
rather than the New Economic Geography (NEG) theory,
better explained the clustering of Small & Cottage
Establishments (SCE) in Java. With a population of
135 millions, Java is not only the “heartland” of
SCE but also the world's most populous island
amongst more than 17,000 islands in Indonesia.
Unlike previous narrowly focused case studies and
examined only a small set of clusters, this study
covered all manufacturing subsectors and regions in
Java by analyzing the unprocessed data of Economic
Census. It also found ten clusters dominated in
almost all of Java’s industrial subsectors and
represented three forms of industrial districts,
namely Marshallian industrial districts, industrial
complex clusters, and mature clusters. By using a
discriminant analysis, the results suggest that the
best predictor was average wages, followed by
proportion of family workers, proportion of residing
in rural regions, and productivity of labour, age of
firm, foster parent proportion, number of skilled
workers and population. This supports previous
study’s suggestion that “the conception of the
district surely goes beyond Marshallian externality
and agglomeration theory”. This study found that
there were SCE within the metropolitan areas that
showed high spatial concentration. However, the
discriminant analysis showed that the market size
was the least important factors affecting SCE in
clustering in the regions. Our study provides at
least some justification for integrating the
industrial district theory and agglomeration theory
to understand the SCE clustering in Java.
Keywords:
industrial districts, cluster, geography, SCE, LME,
NEG, Java, discriminant
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