Determinants of Lay-offs during Indonesian Economic Crisis with Special Attention to Spatial Effects

Seeking the determinants of the lay-off process that takes place at the onset of Indonesian economic crisis in Java island, this study robustly shows that the lay-off rate, i.e., the ratio of number of lay-offs to the size of the labor force, is negatively related to the economic growth rate and share of labor in informal sector; and is positively related to the unemployment rate at the district and municipality level. Further, this study also confirms the empirical significance of spatial effects. Suggesting the existence of interregional spillover effect, the latter implies some degree of integration in the districtlevel lay-off process as well as, most likely, labor market.