Did Indonesian Political Economic Reform Reduce Economic Growth Disparities Among Regions?

Jamal, Abd.; Muhammad, Said; Masbar, Raja; Aliasuddin

This research aims to analyze the success of proliferation of districts as political economic policy in Indonesia to reduce economic growth disparities among districts in Aceh Province, and factors affecting these. Cross sectional and time series data were employed in this research, in periods 2001-2012, by panel regression analysis model. Data were grouped into Aceh-13 (periods 2001-2012), Aceh-23 (2008-2012), and reintegrated to Aceh-10 (2001-2012). Estimation results showed that convergence of economic growth, both σ (sigma) and β (beta) convergence existed significantly, in Aceh-13, Aceh-23, and Aceh-10. Population density and direct government expenditures density both affected convergence of economic growth significantly, which each have negative and positive sign consecutively. The number of teachers, as proxy to knowledge spillover and geographic concentration, are not statistically significant. Proliferation of districts occurred in Aceh, from 13 districts/cities to 23 districts/cities have resulted in a decreasing disparities among districts, indicated by lower half-life indexes from 79.19 years in Aceh-13 to 15.23 years in Aceh-23. Speed of convergence increased from 0.88% in Aceh-13 to 4.55% in Aceh-23.

INDONESIA; POLITICAL reform; ECONOMIC reform; ECONOMIC development; ECONOMIC policy; POPULATION density; PUBLIC spending

DLSU Business & Economics Review, 2015, Vol 25, Issue 1, p81

0116-7111

Academic Journal