Abstract
This study purposes to determine the effect of capital expenditure and gross fixed capital formation on income disparity among districts/cities in West Coast Region in North Sumatera-Indonesia. Analysis of economic development disparity was calculated by Williamson’s Index. The research method was carried out using panel data regression. The result of this research that used annual data for 2012-2016 are: (1) the average of disparity in economic development included in the extremely low category, (2) the capital expenditure variable and gross fixed capital formation variable have significant positive effects on income disparity of the West Coast Region of North Sumatera.
Highlights
Disparity arises due to the absence of equity in economic development
This study purposes to determine the effect of capital expenditure and gross fixed capital formation on income disparity among districts/cities in West Coast Region in North Sumatera–Indonesia
Still according to [2], that the emergence of a balance of regional economic growth has three stages, namely; (a) prior to industrialization between regions have a low level of disparity; (b) if there is a situation where the backwash effect is greater than the spread effect will resulting in increased disparity; and (c) if it occurs where spread effect is greater than the backwash effect will result in a decrease in disparity
Summary
Disparity arises due to the absence of equity in economic development This inequality of development is caused by differences between regions with each other. Disparities can encourage other regions that are still classified as backward to be able to make economic growth positive and in the end the increasing welfare of the population is a positive influence of disparity itself. Some conditions such as economics are wasteful and inefficient, make social stability and solidarity weak, and inequality is an extreme negative influence of economy development disparities which is generally considered unfair [1]. Still according to [2], that the emergence of a balance of regional economic growth has three stages, namely; (a) prior to industrialization between regions have a low level of disparity; (b) if there is a situation where the backwash effect is greater than the spread effect will resulting in increased disparity; and (c) if it occurs where spread effect is greater than the backwash effect will result in a decrease in disparity
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