THE IMPACT OF MIDDLE CLASS SPENDING ON ECONOMIC GROWTH AND INDUSTRY IN INDONESIA

This research aims to analyse the impact of middle class spending on economic growth and industry in Indonesia. In order to reach the aim, Table I-O and Keynes consumption model were used. The classification of middle class criteria has used World Bank standard classified the household into three parts. The household with 40% of middle income is called middle class. The simulation of the policy has been conducted by increasing the income of middle class as for 10%, 15% and 20% from the baseline. The result of the simulation shows that the growth of middle class income has less than 1% contribution to the economic growth, so that respond of output change on the change of middle class income is not elastic. The impact of the rise of middle class income on economic sector growth/relative industry is varied. Out of 66 economic sector/ industries, only 15 sectors receive the impact of more than 1%. Three economic sectors receive the biggest impact are tea sector (33,45%), food crops sector (25,63%) and tobacco sector (13,82%).