Economics Development Analysis Journal

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1 [ Economics Development Analysis Journal 5 (2) (2016) Economics Development Analysis Journal Determinant of Economics Growth in Kedungsepur Region Fitriyah 1, Amin Pujiati 2 1 PT. Pharos Semarang, Jawa Tengah 2 Economics Development Department, Economics Faculty, Universitas Negeri Semarang Article Info Article History : Received January 2016 Accepted March 2016 Published Mei 2016 Keywords: Economic Growth, income disparity, Employment, Government Spending, Revenue (PAD). Abstract Kedungsepur is a Particular Region which is included in the National Spatial Planning which totally purpose to in an integrated manner equitable income disparities and increase the economic growth but in practice the cooperation is less work effectively because of the unbalanced economic growth. This study aims to determine the determinant of economic growth in the region Kedungsepur. This research method using indeks Williamson regression analysis panel data model with Fixed Effect Model method of Generalized Least Square (GLS). The result were obtained average indeks Williamson during include high is 0,75. And regression of labor variables, PAD influenced positively and significantly on the economic growth in Kedungsepur, whereas the variable of government expenditure is positive but not influence significantly toward economic growth in that region. Correspondence Author: Jomblang, Candisari, Semarang City, Jawa Tengah peeth_tree@yahoo.com 2016 Universitas Negeri Semarang ISSN

2 INTRODUCTION Regional economic development is a process whereby local governments and all components of society manage all potentials in each region also form a partnership pattern to increase employment to reduce unemployment and increase economic development in the area (Arsyad, 1999; 108). As a benchmark of development success can be seen from economic growth. However, economic growth is not followed by equality adequate. Later then, income inequality will cause a decline in economic growth (Bagchi & Svejnar, 2015) so that economic growth becomes biased. Central Java government established an area of inter-regional cooperation that can be utilized in equitable development in a region. Inter-regional cooperation is a significant determinant for regional innovation (Sun & Cao, 2015). According to the Regional Regulation (PERDA) of Central Java Province No.21 of 2003 on Spatial Planning of Central Java, there is in the sixth part that is Development of Strategic Area and Priority Area. The purpose of establishment interregional area of regency / city is to cooperating regions each other and increase economic growth while improving income distribution in the form of integrated areas, as global inequality has declined over the decades (Rouggoor & Marrewijk, 2015). Based on the Regional Spatial Layout Development Plan (RTRWP) Central Java is grouped into 8 cooperative areas between regencies or municipalities. These include: (1) KEDUNGSEPUR (Kendal, Demak, Semarang, Semarang, Grobogan, Salatiga. 2) BARLING MAS CAKEP (Banjarnegara, Purbalingga, Banyumas, (3) PURWO MANGGUNG (Purworejo, Wonosobo, Magelang, Temanggung), (4) SUBO SUKO WONO SRATEN (Surakarta, Boyolali, Sukoharjo, Karanganyar, Wonogiri, Sragen, Klaten); (5) BANGLOR (Rembang, Blora); (6) WANARA KURTI (Juawana, Jepara, Kudus, Pati); (7) TANGKALLANGKA (Batang, Pekalongan, Pemalang and Kajen); (8) BREGAS (Brebes, Tegal, Slawi). Table 1. GDRB growth by strategic region from (constant price) Strategic region Kedungsepur 5,01 5,09 5,52 5,82 6,07 5,74 Barlingmascakep 4,05 4,18 5,41 5,16 5,25 5,30 Purwomanggung 4,15 4,57 4,69 4,66 5,44 5,27 Subosukowonosraten 2,32 2,91 6,92 4,62 5,76 5,44 Banglor 4,56 4,75 4,80 3,53 4,93 4,97 Wanarakuti 4,08 4,31 4,44 4,71 4,96 5,12 Tangkallangka 4,10 4,33 4,70 4,92 5,22 5,36 Bregas 4,70 5,09 4,86 4,86 5,20 5,30 Source : Central Java Stattistic Agency, processed Table 1 shows that economic growth in Kedungsepur region is the highest compared to other strategic areas. However, if seen the district / city still experiencing significant inequality. Other districts only contributed 7.36% to 14.01%. This means that almost all districts / municipalities contribute PDRB below the average GDP of Kedungsepur that is equal to 16.66%. From Table 2 it can be seen Semarang municipality gives the biggest contribution in Kedungsepur area while other areas in Kedungsepur area is still below average in contribution to Kedungsepur GDRB, it is shows that there is uneven inequality income and development disparity between Kedungsepur region. 138

3 Table 2. GDRB contribution each Regencies/ Municipalities in KedungSepur in 2013 (Constant price) Regencies GDRB (Million) Kab. Kendal ,08 13,53 Kab. Demak ,15 7,36 Kab. Semarang ,40 14,01 Kota Semarang ,39 54,79 Kab. Grobogan ,81 7,97 Kota Salatiga ,98 2,30 Jumlah , Rata-rata 16,66 Source: Central Java Stattistic Agency, processed Based on the description above, the focus in this study is the determinant of economic growth in the Kedungsepur. Generally, economic growth can be defined as the development of activities in the economy that causes goods and services produced in the community increases and the welfare also. According to Boediono (1981: 1) economic growth is a process of per capita output increase in the long term. According to Todaro (2000; 111) there are three main factors or components in the economic growth of each nation. They are: (1) Capital accumulation, covering all forms or types of new investments invested in land, physical equipment and human resources; (2) Population growth, which the next few years by itself brings the growth of the workforce; (3) Technological advancement, for economists is the most important source of economic growth because of the discovery of new ways or improvements to the old way of doing a job. According to the classical economist, Adam Smith in Suryana (2000: 53) suggests the factors that give rise to economic growth namely population development and technological progress. The growing population will expand the market, and market expansion will drive the level of specialization. Specialization will enhance the level of economic activity, because specialization % will encourage labor productivity and encourage the level of technological development. So the economic growth of the area would be increases. According to Todaro (2000: 478) population growth and labor force has traditionally become one of the positive factors that spur economic growth. A larger number of workers means increasing production levels, while greater population growth means greater domestic market size. Yet it is still questionable how large the rapid rate of population growth will actually have a positive or negative impact on its economic development. Sukirno (2005) said that government expenditure is a set of program that contains the choices or decisions made by the government to provide public goods and services to the public. Government expenditure is part of fiscal policy, which is a government action to regulate the economy by determining the amount of revenues and government expenditure each year as reflected in APBN documents for national and regional budgets for regions. The purpose of the fiscal policy itself is in order to stabilize prices, the level of output and employment and encourage economic growth. Keynesian theory states that government spending is one of the instruments of economic policy to promote economic growth. Keynesian theory considers that government spending is an exogenous factor in which government spending is an instrument of economic policy. Local revenue is one of income source that must always be boost up. Because the higher of local revenue become the indicator of regional financial independence. According to Mardiasmo (2002; 132), the local revenue comes from regional tax, regional retribution, the result of regional-owned enterprises, the result of separated regional wealth management, and other legitimate local revenue. Theoretically, the greater local revenue will have a direct effect on the regional economic growth. According Syafrijal (2008: 33) Neo-Classical Model assume that the mobility of production factors, both capital and labor, at the beginning of the process, the economic growth is deccelerate. Therefore, capital and labor experts tend to concentrate in 139

4 more developed areas so that regional economic growth inequality tends to widen (divergent). However, if the development process continues, an improvement of infrastructure and communications facilities will makes a mobility of capital and labor accelerate sharply. Thus, after the country being developed, the inequality of regional development will be reduced (convergen). RESEARCH METHOD This research uses quantitative approach with quantitative descriptive analysis method. This research was conducted with the scope of Kedungsepur Area with 6 regencies / cities ie Kendal, Demak, Ungaran, Semarang, Grobogan and Salatiga with the study period from The data used in this study is secondary data from Central Java Statistic Agency. The data is GDRB at constant price, labor, government expenditure and Local Revenue in Kedungsepur Area. Indeks Williamson Williamson index is used to determine the magnitude of income inequality. This method is derived from the calculation of regional income per capita and the number of residents of each region in the Area Kedungsepur. if Williamson index result close to zero, it means the level of inequality between regions in the Kedungsepur area are smaller (more evenly). Conversely, if the value of the Williamson index farther away from zero then the imbalance between regions in the Area Kedungsepur widened. IW= Σ(yi y)2 fi n (1) y Whereas : IW = inequality yi y fi = GDRB per capita in region = GDRB per capita of Kedungsepur = number of population in i region and is number of population Kedungsepur. Panel Data Analysis Regression technique was chosen in this study because it is a combination of two types of data that is cross section data and time series data. Data consist of several regencies / cities in the period of six years. To estimate Manpower, Government Expenditure and Local Original income on economic growth, regression analysis tools are used with panel data model. According to Ajija, et al (2011: 51) there are three methods used to estimate panel data: Pooled Least Square model (Comon Effect), this model is known as the Comon Effect estimation, which is the simplest regression technique to estimate panel data by combining only time series and cross section data. Fixed Effect Approach Model, In Fixed Effect method estimation can be done with no weight or Least Square Dummy Variable (LSDV) and with weighting (cross section weight) or General Least Square (GLS). The purpose of weighting is to reduce the heterogeneity between cross section units (Gujarati, 2010: 237). Random Effect Approach Model, In a random effect model, different parameters between regions and between times are entered into error. Because of this, the random effects model is also called the component component error. Panel data is a combination of time series and cross section data. Time-consuming data usually includes one object / individual but includes several periods. So the model that can be formed is: GR = αi + β1logtkit + β2logexpdit + β3logpadit + ϱ it... (2) Whereas : GR α β 1,β 2,β 3 log TK EXPD Log PAD e = economic growth = constant = coefficient = labour log = govt expenditure = local revenue = error term RESULTS AND DISCUSSION Inequality Between Region The biggest inequality occurred in the Semarang municipality because it has the highest average Williamson index of start from 2008 to 2013 Semarang municipalities always grew up steadily but followed by income 140

5 inequality. In accordance with Neo Marxist theory which states that economic growth will always cause widening the gap of inequality. Tabel 3. Williamson index between region in Kedungsepur Region average Kab. Kendal Kab. Demak Kab. Semarang Kota Semarang Kab.Grobogan Kota Salatiga Rata-rata Source: Data, processed Semarang and Grobogan regency have Williamson index more than 0.3 which is and This means that both regions are inequality of income at a moderate level in the Area Kedungsepur. Kendal, Salatiga and Demak are the regions with the lowest Williamson index in Kedungsepur area because the Williamson's index below 0.3 ie 0,106, 0,230 and 0,202. This means that the area has a low inequality in Kedungsepur Area. Based on the results of regression analysis can be seen that the variable of labor has a positive and significant effect with coefficient on economic growth. This indicates that if the workforce increased by 1 percent, it will increase economic growth by percent. This is in accordance with the research hypothesis stating that there is a positive influence between labor on economic growth in Kedungsepur. The results of this study also findings from previous research is research conducted Deddy Rustiono (2008), Zayekti Suindyah D (2009), Indra Rukmana (2012) which states that the variable of labor has a positive and significant impact on economic growth. Based on the regression analysis can be seen that government expenditure are positively related but not significantly affect economic growth in Kedungsepur area. If government spending increased by 1 percent then it will increase economic growth by percent. This is not in line with the hypothesis states a positive and significant effect between government spending on economic growth. This result also supports the findings of previous researches conducted by Adi Raharjo (2006), Suwanti (2013) which states that the effect of government spending is positively but has no significant effect on economic growth. Local Revenue variable has a positive and significant relation to economic growth in Kedungsepur Area. This indicates if local revenue increase by 1 percent, then will increase economic growth equal to 0, percent. In accordance with the hypothesis there is a positive influence on economic growth in the Kedungsepur which indicates that the greater local Revenue by the District / City in the Kedungsepur give a positive influence on economic growth. This is in line with previous research that is research conducted by Istiandari (2009) and Laeni Najiah (2013) which states that the local Revenue is positively and significantly affect to economic growth. CONCLUSION Based on the analysis it can be taken conclusion that the index rate williamson in Kedungsepur area is That is, income inequality in kedungsepur belongs to high inequality because the index is more than 0.5. Labor has a positive and significant influence on economic growth in Kedungsepur. Government spending is positively related but has no significant effect on economic growth in 141

6 Kedungsepur. Local Revenue (PAD) has a positive and significant effect on economic growth in Kedungsepur area. In order to increase economic growth in Kedungsepur. It is neccesarry needs an efforts in unifying the perception between regions to create a mutually beneficial cooperation. In addition, the Regional Government in the Kedungsepur should allocate proportional regional spending between indirect and direct spending that focus more on the public interest. REFERENCES Ajija, Shochrul R, et al Smart Way to Master Eviews. Jakarta: Salemba Empat. Arsyad, Lincolin Introduction to Regional Economic Planning and Development. Yogyakarta: BPFE-YOGYAKARTA. Atahrim, Avanda F Analysis of the Influence of Labor and Government Expenditure on Economic Growth of Industrial Sector of Regency / City in Central Java Province. Essay. Economics of Development Studies. Jakarta: UIN Syarif Hidayatullah. Bagchi, S. & Svejnar, J., Does wealth inequality matter for growth? The effect of billionaire wealth, income distribution, and poverty. Journal of Comparative Economics, 43 (3), pp Boediono International Economy Issue 1 Yogyakarta: BPFE. Central Statistics Bureau (BPS). Central Java In Figures. Year Gujarati, Darmodar N Fundamentals of Econometrics. Jakarta: Salemba Empat. Istiandari, Rahmasari Regional Economic Governance and Public Welfare in Indonesia. Jakarta: FE-UI. Kuncoro, Mudrajat Spatial and Regional Analysis. Yogyakarta: UPP AMP YKPN. Mardiasmo Autonomy and Regional Financial Management. Yogyakarta: Andi Publisher. Najiah, Laeni Analysis of the Effect of Local Original Income, Balancing Funds, and Labor Force Participation Rate to GRDP in Depok City Period Essay. Economics and Business Faculty. UIN Syarif Hidayatullah Jakarta. Puspitawati, L. (2013). Comparative Analysis Of Factors Cause Of Development Between District In Kedungsapur Area. Economics Development Analysis Journal, 2 (2). Raharjo, Adi The Effect of Government Expenditure, Private Investment, Work Force on Economic Growth Thesis. Postgraduate Diponegoro University of Semarang. Ramdani, M. (2015). Poverty in Indonesia, Economics Development Analysis Journal, 4 (1). Regional Regulation of Central Java Province No.21 of 2003 on Spatial Planning of Central Java Province. Rouggoor, W. & Marrewijk, v., Demography, Growth, and Global Income Inequality. World Development, 74, pp Rukmana, I.. The Effect of Disparity of Income, Population and Inflation on Economic Growth in Central Java Year Economics Development Analysis Journal, 1, jul.2012.availableat: < daj/article/view/323/373>. Date accessed: Feb Rustiono, Deddy Analysis of the effect of investment, labor, and government expenditure on economic growth in Central Java Province. Master of Science in Economics and Development Studies. UNDIP Semarang. Sjafrizal, 2008, Economic Growth and Regional Inequality Western Indonesia Region, Prism, LP3ES, No. 3, Suindyah, Sayekti The Effect of Monkey Investment and Government Expenditure on Economic Growth in East Java Province. Vol. 15. Pp University of Darul Ulum Jombang. Sukirno, Sadono Micro Economics Introduction theory. Jakarta: PT. Raja Grafindo Persada. Sun, Y. & Cao, C., Intra- and inter-regional research collaboration across organizational boundaries: evolving patterns in China. Technological Forecasting and Social Change, 96, pp Suryana Economic Development (Problematic and Approach). Jakarta: Salemba Empat Suwanti., Gunanto, Edy Analysis of the Effect of Government Expenditures on Agricultural Sector on Agricultural Sector GRDP 35 Kabupaten / City in Central Java Province Journal of Economics. Vol 2 (4). Todaro, Michael P Economic Development. Jakarta: Bumi Aksara 142