The role of infrastructure in economic growth and income inequality in Indonesia

Bibliographic Data

ID2434586
AuthorsAchmad Tjachja Nugraha (0000-0001-9184-7773, University of Brawijaya), Gunawan Prayitno (0000-0003-4534-9524, University of Brawijaya), Masito Erlando Situmorang (University of Brawijaya), Ahmadriswan Nasution (University of Brawijaya)
Year2020
Volume13
Issue1
Pages102-115
Publication date2020-03-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueEconomics & Sociology (JOURNAL)
Journal identifiersISSN: 2071-789X • E-ISSN: 2306-3459
PublisherCentre of Sociological Research, Szczecin, Poland (PUBLISHER • PL)
DOI10.14254/2071-789x.2020/13-1/7
OpenAlexW3015919585
LanguageEN
Citations received10

The relationship between infrastructure development, economic growth, and income inequality has always been debated. Those debates raised the question of "is there a role for infrastructure development in economic growth which in turn encourages a decline in income inequality?". This study aims to analyze the direct effect of infrastructure development on economic growth and the indirect effect -on income inequality. The present study used the Gini Ratio, Gross Regional Domestic Product (GRDP) data at constant market prices, investment, number of workforces, percentage of poor population, distribution of clean water, electricity distribution, and road length as of 2010-2016. The analytical methods applied here include descriptive method along with a twostep regression analysis method. The results reveal that infrastructure had a positive effect on economic growth, whereas direct economic growth harmed income inequality. These findings demonstrate that infrastructure indirectly reduces income inequality. Thus, infrastructure development, especially basic infrastructure and transportation, could reduce income inequality in Indonesia. Based on these findings, the government and related parties should encourage investment in basic infrastructure and transportation to improve economic performance sustainably.

Development economics · Economic inequality · Economics · Inequality · Economic Growth and Productivity · Fiscal Policy and Economic Growth · Income, Poverty, and Inequality · Mathematics

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