Triple reproduction analysis of economy, social, and environment in Indonesia: a simultaneous panel data analysis using EC2SLS

Abstract

In the last few years, Indonesia’s economic growth has been slowing down. In 2011, Indonesia’s economic growth was 6,16%, but in 2014 it decreased to 5,2%. However, Indonesia’s economic growth is still positive compared to other countries. A region with high economic growth should have good environmental and social conditions. Good social conditions can be reflected through the Human Development Index (HDI) as reflection of actual well-being of the population. However, some regions in Indonesia have an unbalance system on economic growth and their social and environmental conditions. For example, during 2011-2014, DKI Jakarta has economic growth and HDI which tends to be high but has the lowest Environmental Quality Index (EQI), compared to other regions. It becomes a problem because high economic conditions should be supported by social and environmental conditions in order to achieve a sustainable economic system. To build a sustainable economic system, it is necessary to balance among the economic, social, and environment factors. The balance system among these factors can be explained by Triple Reproduction Theory which consists of three subsystems, namely reproduction of the economy, humans, and natural environment. Therefore, this study aims to see relationship among these three factors in 33 provinces in Indonesia, from 2011 to 2014. Using simultaneous panel data analysis using EC2SLS method, the results are: 1) There is a simultaneous relationship between economic growth and EQI in Indonesia, 2) There is simultaneous relationship between HDI and EQI in Indonesia, 3) There is no significantly relationship between economic growth and HDI in Indonesia, 4) Population density proved to have an effect on EQI in Indonesia.