Dynamics of Food and Beverage Subsector Industry in East Java Province: The Effect of Investment on Total Labor Absorption

Gross Regional Domestic Product (GRDP) gives an overview of economic development performance in over time. The GRDP value in East Java province is increasing in every year, but this value cannot reduce unemployment rate. The existing of economic development condition is not able to absorb the large number of unemployment where the number of work force is also increasing in the period of time. These phenomena will influence social and economic problems in a region. Investment is one of ways that could be used in order to increase the field of business and reduce the unemployment rate. In this paper, describes the industrial development in food and beverage industries subsector in East Java. By using system dynamic approach, it will construct the change of business investment related to labor absorption in East Java which is affected by economic and climate change of industrial business factors. This research will consider several policy scenarios that have been taken by government such as changes in the proportion of infrastructure funds, the proportion of aid investment by government and licensing index. This scenario could reach the main objective of the system.