Transportation Infrastructure Relations on Economic Growth in Sumatra Island

Abstract

Transportation infrastructure is a stimulus in the economic growth of the region, no exception in Indonesia. But the interaction between transportation and economic development is a link to transportation’s ability to magnify the impact of urbanization. This raises the question of whether the existence of transportation can explain the economic growth that is occurring. On the other hand, whether the lack of transportation infrastructure is due to the economic capabilities that exist in the region. This research aims to pay attention to the relationship between transportation and economic growth in Sumatra Island. The growth of transportation infrastructure may explain economic growth in all districts of Sumatra Island but the magnitude of those relations in the urban areas are far greater than in nonurban areas. Using the Multispatial CCM method, it appears that investment in transportation infrastructure does not directly increase the GDP of transportation in the region. This research suggests that road investment can have an impact on GDP through increasing the region’s population which then provides an increase in GDP.