Analysis of Growth and Convergence among Islands in Indonesia (Neoclassical Model)
Journal Title: IOSR Journal of Economics and Finance (IOSR-JEF) - Year 2018, Vol 9, Issue 3
Abstract
This study aims at analyzing (1) does the growth of real income per capita generate absolute convergence among islands in Indonesia, (2) is there conditional convergence among islands in Indonesia by adding real investment, number of labor, export, and import value as control variables (3) is there a decline disparity of real income per capita among islands in Indonesia over time.The data used were secondary data of BPS and BI publication since 1995 to 2015 paneled with data from six islands (Sumatera, Java, Bali & Nusa Tenggara, Kalimantan, Sulawesi, and Maluku & Papua) involving real income per capita, real investment, number of labor, export, and import value. Barro Salai Martin convergence model was used to test the convergence hypothesis. The results of the study show that (1) the growth of real income per capita does not generate absolute convergence among islands in Indonesia because the correlation between the growth and real income per capita in the previous period is positive and significant (2) there is not conditional convergence among islands in Indonesia, but real income per capita, real investment, and the number of labor are significant in affecting the growth, while export and import variable are not significant (3) the disparity of income per capita among islands in Indonesia does not decrease over time measured through the improvement of standard deviation. Divergence among islands in Indonesia occurs due to the performance of investment and the quality of labors among islands which is very different. Besides, the ownership of natural resources and infrastructure among island is very unequal. The conclusion of this research is that the growth of real income per capita among islands in Indonesia does not lead to equity. Government’s policy is required to move investments into areas that cannot invest efficiently by prioritizing the development of infrastructure in such regions, boosting the improvement of labors quality in regions with poor society, social modal, politic stability, and trade among islands in order to the inequality does not widened.
Authors and Affiliations
Heppi Millia, Muhamad Syarif, Manat Rahim, Gamsir Bachmid
Keywords
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- EP ID EP414847
- DOI 10.9790/5933-0903032029.
- Views 181
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