This study explores employment development strategies aimed at bolstering economic growth in North Sumatra Province using the Vector Autoregression (VAR) model and an eighteen-year time series dataset. The variables analyzed include the Human Development Index (HDI), total population, Gross Regional Domestic Product (GRDP), Labor Force Participation Rate (LFPR), and Open Unemployment Rate (OUR). The estimation results reveal dynamic interrelationships among these variables over short, medium, and long-term periods. The VAR analysis with a lag of 2 illustrates how each variable contributes to both itself and the other variables. It also shows that past variables (t-1) significantly impact current variables. Furthermore, the response function analysis identifies how a change in one variable is responded to by others across different time horizons. Stability analysis confirms that all variables maintain medium-to-long-term stability over a five-year period. The Forecast Error Variance Decomposition (FEVD) highlights HDI, population, and GRDP as the most influential variables in shaping the employment system and economic development overall. The VAR model used meets the stability test criteria, making the findings a reliable basis for policy research.
Ilmi et al. (Mon,) studied this question.