Communications - Scientific Letters of the University of Zilina 2021, 23(3):A184-A192 | DOI: 10.26552/com.C.2021.3.A184-A192

The Impact of Infrastructure Spending on Economic Growth: A Case Study of Indonesia

Makmun Syadullah ORCID..., Dhani Setyawan ORCID...
Fiscal Policy Agency, Ministry of Finance of the Republic of Indonesia, Jakarta, Indonesia

This paper aims to analyze the impact of infrastructure spending on economic growth in Indonesia, which includes investment in road, port and irrigation infrastructure. The period of observation was 2011-2018, which covered 29 provinces with consideration of data availability. This study employed the growth model with a panel data analysis, which analyze the relationship between the economic growth and government investment in infrastructure in the long run. The most essential finding in this study is that the economic growth is positively influenced by government investment in road, port and irrigation infrastructure. Road infrastructure investment has a significant positive impact and the effect occurs in the fourth year after infrastructure development. In comparison, port and irrigation infrastructure investment have a positive but not significant impact to other variables.

Keywords: infrastructure investment; economic growth; transportation; public investment; agriculture

Received: November 20, 2020; Accepted: December 23, 2020; Prepublished online: May 19, 2021; Published: July 1, 2021  Show citation

ACS AIP APA ASA Harvard Chicago Chicago Notes IEEE ISO690 MLA NLM Turabian Vancouver
Syadullah, M., & Setyawan, D. (2021). The Impact of Infrastructure Spending on Economic Growth: A Case Study of Indonesia. Communications - Scientific Letters of the University of Zilina, 23(3), A184-192. doi: 10.26552/com.C.2021.3.A184-A192
Share...
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. HOLTZ- EAKIN, D., SCHWARTZ, A. E. Infrastructure in a structural model of economic growth. Regional Science and Urban Economics [online]. 1995, 25(2), p. 131-151. ISSN 0166-0462. Available from: https://doi. org/10.1016/0166-0462(94)02080-Z Go to original source...
    2. CALDERON, C., SERVEN, L. Infrastructure and economic development in Sub-Saharan Africa. Journal of African Economies [online]. 2010, 19(1), p. 13-87. ISSN 0963-8024, eISSN 1464-3723. Available from: https://doi. org/10.1093/jae/ejp022 Go to original source...
    3. STRAUB, S. Infrastructure and growth in developing countries: recent advances and research challenges. Policy Research Working Paper No. 4460. The World Bank Development Research Department Research Support Team, 2008. Go to original source...
    4. ASCHAUER, D. A. The role of public infrastructure capital in Mexican economic growth. Economia Mexicana. Nueva Epoca. 1998, VII(1), p. 47-78. ISSN 1665-2045.
    5. ATIF, A., FLYVBJERG, B., BUDZIER, A., LUNN, D. Does infrastructure investment lead to economic growth or economic fragility? Evidence from China. Oxford Review of Economic Policy [online]. 2016, 32(3), p. 360-390. ISSN 0266-903X, eISSN 1460-2121. Available from: https://doi.org/10.1093/oxrep/grw022 Go to original source...
    6. FOX, W. F. Strategic options for urban infrastructure management (English) [online]. Urban management programme policy paper; UMPP no. 17. Washington, D.C.: The World Bank, 1994. ISSN 1020-0215. Available from: http://documents.worldbank.org/curated/en/946371468765270932/Strategic-options-for-urban-infrastructure-management Go to original source...
    7. GRIGG, N. DAN FONTANE, D. G. Infrastructure system management and optimization. In: Internasional Seminar Paradigm and Strategy of Infrastructure Management: proceedings. 2000.
    8. KODOATIE, R. J. Introduction to management: infrastructure / Pengantar manajemen: infrastruktur (in Indonesian). Yogyakarta: Pustaka Pelajar, 2005. ISBN 979-3237-9.
    9. CANNING, D., P. PEDRONI. The effect of infrastructure on long-run economic growth. Department of Economics Working Papers. Williamstown, MA: Williams College, Department of Economics, 2004.
    10. TODARO, M. P., SMITH, S. C. Economic development. 9. ed. England: Pearson Education Ltd., 2006. ISBN 9780321485731.
    11. ARROW, K., KURZ, M. Public investment, the rate of return and optimal fiscal policy. Baltimore, MD: The Johns Hopkins University Press, 1970. ISBN 978-1-61726-030-8.
    12. BARRO, R. J. Government spending in a simple model of exogenous growth. Journal of Political Economy [online]. 1990, 98, p. 103-125. ISSN 0022-3808, eISSN 1537-534X. Available from: https://doi.org/doi:10.1086/261726 Go to original source...
    13. FUTAGAMI, K., MORITA, Y., SHIBATA, A. Dynamic analysis of an endogenous growth model with public capital. Scandinavian Journal of Economics [online]. 1993, 95, p. 607-625. ISSN 0347-0520, eISSN 1467-9442. Available from: https://doi.org/10.2307/3440914 Go to original source...
    14. World Bank. World Development Report 1994: Infrastructure for development [online]. New York: Oxford University Press, 1994. Available from: https://openknowledge.worldbank.org/handle/10986/5977
    15. ISMAIL, N. W., MAHYIDEEN, J. M. The Impact of infrastructure on trade and economic growth in selected economies in Asia [online]. ADBI Working Paper Series No. 553. Tokyo, Japan: Asian Development Bank Institute, 2015. Available from: http://www.adb.org/publications/impact-infrastructuretrade-and-economic-growth-selected-economies-asia/ Go to original source...
    16. Global competitiveness index - World Economic Forum [online] [accessed 2020-01-16]. 2014. Available from: http://www.weforum.org/reports
    17. SHAH, A. Dynamics of public infrastructure, industrial productivity and profitability. Review of Economics and Statistics [online]. 1990, 74(1), p. 28-36. ISSN 0034-6535, eISSN 1530-9142. Available from: https://doi. org/10.2307/2109539 Go to original source...
    18. UCHIMURA, K., GAO, H. The importance of infrastructure on economic development. Washington, DC: World Bank, Latin America and the Caribbean Regional Office, 1993.
    19. EASTERLY, W., REBELO, S. Fiscal policy and economic growth: an empirical investigation. Journal of Monetary Economics [online]. 1993, 32(3), p. 417-458. ISSN 0304-3932. Available from: https://doi.org/10.3386/w4499 Go to original source...
    20. CANNING, D. A database of world stocks infrastructure, 1950-1995. World Bank Economic Review. 1998, 12(3), p. 529-547. ISSN 0258-6770, eISSN 1564-698X. Go to original source...
    21. ASCHAUER, D. A. Highway capacity and economic growth. Economic Perspectives. 1990, 14(5), p. 14-24. ISSN 0164-0682.
    22. NG, C. P, LAW, T. H., JAKARNI, F. M., KULANTHAYAN, S. Road infrastructure development and economic growth. IOP Conference Series: Materials Science and Engineering [online]. 2019, 512, 012045. ISSN 1757-8981, eISSN 1757-899X. Available from: https://doi.org/10.1088/1757-899X/512/1/012045 Go to original source...
    23. DENG, P., LU, S., XIAO, H. Evaluation of the relevance measure between ports and regional economy using structural equation modelling. Transport Policy [online]. 2013, 27, p. 123-133. ISSN 0967-070X. Available from: https://doi.org/10.1016/j.tranpol.2013.01.008 Go to original source...
    24. JUNG, B.-M. Economic contribution of ports to the local economies in Korea. The Asian Journal of Shipping and Logistics [online]. 2011, 27(1), p. 1-30. ISSN 2092-5212. Available from: https://doi.org/10.1016/S2092-5212(11)80001-5 Go to original source...
    25. YOCHUM, G. R., AGARWAL, V. B. Economic impact of a port on a regional economy: note. Growth Change [online]. 1987, 18(3), p. 74-87. eISSN 1468-2257. Available from: https://doi.org/10.1111/j.1468-2257.1987.tb00082.x Go to original source...
    26. BOTTASSO, A, CONTI, M, FERRARI, C, MERK, O, TEI, A. The impact of port throughput on local employment: evidence from a panel of European regions. Transport Policy [online]. 2013, 27, p. 32-38. ISSN 0967-070X. Available from: https://doi.org/10.1016/j.tranpol.2012.12.001 Go to original source...
    27. BOTTASSO, A, CONTI, M, FERRARI, C, TEI, A. Ports and regional development: a spatial analysis on a panel of European regions. Transportation Research Part A: Policy and Practice [online]. 2014. 65, p. 44-55. ISSN 0965-8564. Available from: https://doi.org/10.1016/j.tra.2014.04.006 Go to original source...
    28. HUSSAIN, I., HANJRA, M. A., TRIKAWALA, S., WIJERATNE, D. Impact of irrigation infrastructure development on dynamics of incomes and poverty econometric evidence using panel data from Sri Lanka. A collaborative research project initiated by the JBIC Institute, the Japan Bank for International Cooperation and undertaken by the International Water Management Institute (IWMI). 2003.
    29. ASCHAUER, D. A. Is public expenditure productive? Journal of Monetary Economics [online]. 1989, 23(2), p. 177-200. ISSN 0304-3932. Available from: https://doi.org/10.1016/0304-3932(89)90047-0 Go to original source...
    30. MUNNELL, A. Why has productivity growth declined? Productivity and public investment. New England Economic Review. 1990, Jan, p. 3-22. ISSN 0028-4726.
    31. KAMPS, CH. The dynamic effects of public capital: VAR evidence for 22 OECD countries [online]. Kiel Working Paper, No. 1224. Kiel: Kiel Institute for World, 2004. Available from: http://hdl.handle.net/10419/17768
    32. FEDDERKE, J. W., PERKINS, P., LUIZ, J. M. Infrastructural investment in long-run economic growth: South Africa 1875-2001. World Development [online]. 2006, 34(6), p. 1037-1059. ISSN 0305-750X. Available from: https://doi.org/10.1016/j.worlddev.2005.11.004 Go to original source...
    33. SAHOO, P., DASH, R. K. Infrastructure development and economic growth in India. Journal of the Asia Pacific Economy [online]. 2009, 14(4), p. 351-365. ISSN 1354-7860, eISSN 1469-9648. Available from: https://doi. org/10.1080/13547860903169340 Go to original source...
    34. SAHOO, P., DASH, R. K., NATARAJ, G. Chinas growth story: the role of physical and social infrastructure. Journal of Economic Development [online]. 2012, 37(1), p. 53-75. ISSN 0254-8372. Available from: https://doi. org/10.35866/caujed.2012.37.1.003 Go to original source...
    35. BLOCH, H, TANG, S. H. K. The role of financial development in economic growth. Progress in Development Studies [online]. 2003, 3(3), p. 243-251. ISSN 1464-9934, eISSN 1477-027X. Available from: https://doi. org/10.1191/1464993403ps063pr Go to original source...
    36. BOOPEN, S. Transport infrastructure and economic growth: evidence from Africa using dynamic panel estimates. The Empirical Economics Letters. 2006, 5(1), p. 37-52. ISSN 1681 8997.
    37. VLAHINIC LENZ, N., PAVLIC SKENDER, H., MIRKOVIC, P. A. The macroeconomic effects of transport infrastructure on economic growth: the case of Central and Eastern E.U. member states. Economic Research-Ekonomska Istrazivanja [online]. 2019, 31(2018-1), p. 1953-1964. ISSN 1331-677X, eISSN 1848-9664. Available from: https://doi.org/10.1080/1331677X.2018.1523740 Go to original source...
    38. SEETHAPALLI, K, BRAMATI, M. C., VERDES, D. How relevant is the infrastructure to growth in east Asia?[online]. World Bank Policy Research Working, Paper No. 4597. 2008. Available from: https://doi.org/10.1596/1813-9450-4597 Go to original source...
    39. JOULE, T. A., ALLOUCHE, M. A. Impacts of seaport investment on economic growth. Promet - Traffic and Transportation [online]. 2016, 28(4), p. 365-370. ISSN 0353-5320, eISSN 1848-4069. Available from: https://doi. org/10.7307/ptt.v28i4.1933 Go to original source...
    40. JIANG, N. Seaport investment and economic development in China. Dalian, China: Dalian Marine University Press, 2010.
    41. MARYANINGSIH, N., HERMANSYAH, O., SAVITRI, M. The impact of infrastructure to Indonesian economy /Pengaruh infrastruktur terhadap pertumbuhan ekonomi Indonesia (in Indonesian). Buletin Ekonomi Moneter dan Perbankan [online]. 2014, 17(1), p. 62-98. ISSN 1410-8046, eISSN 2460-9196. Available from: https://doi. org/10.21098/bemp.v17i1.44 Go to original source...
    42. ELWA P, F., TAN, S., ACHMAD, E. The impact of infrastructure development to agriculture sector in Muaro Jambi / Pengaruh pembangunan infrastruktur terhadap pengembangan sektor pertanian di kabupaten Muaro Jambi (in Indonesian). Jurnal Perspektif Pembiayaan dan Pembangunan Daerah [online]. 2013, 1(1), p. 29-34. ISSN 2338-4603, eISSN 2355-8520. Available from: https://doi.org/10.22437/ppd.v1i1.1339 Go to original source...
    43. DEMURGER, S., Infrastructure development and economic growth: an explanation for regional disparities in China? Journal of Comparative Economics [online]. 2001, 29(1), p. 95-117. ISSN 0147-5967. Available from: https://doi.org/10.1006/jcec.2000.1693 Go to original source...
    44. HUSSAIN, I., HANJARA, M., THRIKWALA, S., WIJERATHNA, D., SHINKAI, N., SAWADA, Y. Impact of irrigation infrastructure development on dynamics of incomes and poverty: econometric evidence using panel data from Sri Lanka. JBICI Research Paper No. 32. Japan: JBIC, 2007.

    This is an open access article distributed under the terms of the Creative Commons Attribution 4.0 International License (CC BY 4.0), which permits use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content