The Dynamics Model of Cross-Regional to Enhance Economic Growth: New Empirical Evidence from Indonesia

Abstract

Economic growth growth is crucial to improve community welfare in the long term. Although Indonesia’s economic growth is on an upward trend, Indonesia must remain vigilant in its relationship with the global world due to the rapidly changing and highly uncertain dynamics. Indonesia’s economic growth is also inseparable from the influence of various provinces’ economic growth, which varies due to the economic dynamics between regions. These dynamics can influence the region’s contribution to national economic growth. Therefore, identifying the important role of the determining factors of economic growth and appropriate policies in dealing with economic dynamics between regions is crucial because sustainable economic growth is also essential for improving community welfare. This study examines the determinants of Indonesia’s economic growth from a regional economic perspective, using a Dynamic Panel Data analysis model with three estimation models. The first model focuses on the primary variables of technological progress, population, and investment. The second model adds the human capital variable, while the third model further incorporates the variables of open economy, economic structure changes, and income inequality. The study utilizes data from the Indonesian Central Statistics Agency, covering 27 provinces from 2015 to 2022. The results indicate that increased technological progress, population, investment, human resources, economic openness, and economic structure changes can increase economic growth, while inequality of income harms economic growth. This research has implications that in creating determinant conditions for conducive economic growth, it needs to be carried out evenly in all provinces in Indonesia.

Keywords

• economic growth
• technological progress
• population
• investment
• human capital
• open economic
• structural change
• income inequality
• dynamic model
• o1
• o3
• o4