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The Determinants of Provincial Growth in Indonesia During 1983-2003

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Author Info
Yogi Vidyattama
Abstract

The discussion of income disparity has emphasized the need for research in finding the growth determinant. This chapter will investigate the determinants of provincial growth of income per capita. It uses the regional panel data within a country, namely the 1983–2003 Indonesian provincial data sets. This will bring up some issues that will differentiate the application in sub national to cross country application and try to address those issues. To achieve this goal, this study will utilise GMM dynamic panel estimation and the reduced form of the Solow-Swan growth model in order to estimate a regional growth model. Gross Domestic Product (GDP) per capita with and without mining sector value added as well as household consumption per capita are the proxies of income in this studies. The results are as follows. The overall investment (gross fixed capital formation) is estimated to have an insignificant impact on the growth of all income proxies. The average year of schooling has a different impact on different proxies of income. There are negative impacts on growth from local government spending on GDP per capita and GDP non mining per capita. The impact of transportation infrastructure in term of roads per capita is significantly positive on GDP per capita growth, and weakly significantly positive on household expenditure. The ratio of trade to GDP, as a proxy of openness, is the only significant growth determinant of all income proxies. The result from institutional variable is positively significant for GDP per capita but not significant for GDP non mining and household consumption. On the other hand, financial institutions variable is only significant in determining GDP non mining growth.

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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c012_044.

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Length: 43 pages
Date of creation: Jun 2007
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Handle: RePEc:deg:conpap:c012_044

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  2. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, 09. [Downloadable!]
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  3. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
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  5. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August. [Downloadable!] (restricted)
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  6. Levine, Ross, 1999. "Law, Finance, and Economic Growth," Journal of Financial Intermediation, Elsevier, vol. 8(1-2), pages 8-35, January. [Downloadable!] (restricted)
  7. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July. [Downloadable!] (restricted)
  8. M Pesaran & Yongcheol Shin & Ron P Smith, 2004. "Pooled mean group estimation of dynamic heterogeneous panels," ESE Discussion Papers 16, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
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