Spatial Redistributions of Regional Economic Activity in Central Java (Direct Error Correction Model Causality Approach)

Jihad Lukis Panjawa,Bhimo Rizky Samudro

doi:10.23917/jep.v21i1.9587

Abstract

This study analyzes spatial inequality through a causal relationship between inequality and economic growth within-recidency, between-recidency and overall in Central Java.The analytical tool used is the Direct Error Correction Model causality. This study shows that spatial concentrations throughout the observation period are quite high. In the 2001-2008 period there was an increasing tendency for spatialconcentration, reflecting the decline in the distribution of the Gross Regional Domestic Product (GRDP) share of districts and cities in Central Java. We also obtained similar findings in a number of regions both within and between-recidency. Post-2008, spatial concentration tends to decrease, indicating the distribution of the Gross Regional Domestic Product share. Other findings indicate a one-way relationship shown economic growth towards inequality. Another important contribution is that economic growth in inequality only occurs in the long term. Thus there has been convergence because of the increase ineconomic growth which is able to reduce inequality in all areas of Central Java, including within and between-recidency. This proves that during the implementation of regional autonomy there is a spread effect greater than the backwash effect in Central Java, including within and between-recidency.

Highlights

Significant development inequality is often overlooked in the approach with an emphasis on high macroeconomic growth (Gross Domestic Product/GDP)
The purpose of this study is to examine spatial inequality, to find out the causal relationship between inequality and economic growth in residency and between-residency, and how big the role is in Central Java, Indonesiausing Direct Error Correction Model Causality Approach
Spatial inequality is represented by theil entropy index related to the development of the gap in spatial distribution measured by the share of gross regional domestic product

Summary

Introduction

Significant development inequality is often overlooked in the approach with an emphasis on high macroeconomic growth (Gross Domestic Product/GDP). The problem of inequality has never looked at the size and level of development of an area(Rustiadi, Saefulhakim, & Panuju, 2011). Between-regional inequality describes the development gap both withwithinregional and between-regional (Kuncoro, 2011). The diversity of potential natural resources, geographical conditions, the quality of human resources, ethnicities, political situations, history, government policies, economics and administrations are the causes of betweenregional inequality. Between-regional inequality is decomposed into subgroups including income, other diverse unit characteristics and heterogeneity which give rise to between-regional trends in inequality and inter-sectoral economics in an area

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Conclusion