Revealing The Spatial Matter in Indonesia’s Economic Growth Model: A Cross-Province Analysis

Edy Santoso; Ahmed Mohamed Annegrat; Teguh Hadi Priyono; Endah Kurnia Lestari; Vebry Eka Kusumawardhani

doi:10.15408/etk.v25i1.46105

Authors

Edy Santoso Universitas Jember http://orcid.org/0009-0001-5677-3489
Ahmed Mohamed Annegrat Libyan Authority for Scientific Research
Teguh Hadi Priyono Universitas Jember
Endah Kurnia Lestari Universitas Jember
Vebry Eka Kusumawardhani Universitas Jember

DOI:

https://doi.org/10.15408/etk.v25i1.46105

Keywords:

domestic direct investment, foreign direct investment, economic growth, spatial model

Abstract

Research Originality: This research integrates spatial econometric modeling to analyze the determinants of Indonesia's economic growth, highlighting the influence of spatial dependence on neighboring regions. It uses spatial models to provide insights into Indonesia's growth dynamics from a geographically interdependent perspective.

Research Objectives: Examine the key factors driving Indonesia's economic growth by incorporating internal regional elements and external spatial influences from neighboring provinces.

Research Method: This study employs a spatial econometric approach to analyze Indonesia’s economic growth across 34 provinces from 2015 to 2024.

Empirical Results: The empirical analysis confirms the presence of spatial dependence in regional economic growth, with neighboring provinces influencing one another. Foreign Direct Investment (FDI), Domestic Direct Investment (DDI), and population significantly impact growth directly and through spillovers. However, road infrastructure has an insignificant effect.

Implications: This research emphasizes the importance of provincial collaboration on investment, infrastructure, and trade. While population growth matters, skill enhancement is crucial for development. Policymakers should prioritize high-quality infrastructure and leverage spatial data to promote balanced growth and reduce regional disparities.

JEL Classification: C33, O16, O18, R11

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