Inclusive Economics Growth Determinants

Published: 15 August 2023| Version 1 | DOI: 10.17632/byfp5y3x6b.1
Dyana Fam


This research focuses on inclusive economic growth and its determinants in Indonesia. It uses the yearly data from 2015 until 2021 in 34 provinces of Indonesia. The scope of this study includes inclusive growth, human capital development in term of health and education, public investment and private investments. Meanwhile, the type of research data in this study is secondary data taken from the Central Bureau of Statistics and the Directorate General of Financial Balance (DPJK). The data used is annual data. Then, the term inclusive economic growth in this study borrows the definition by UNDP (Kjøller-Hansen & Sperling, 2020) Growth is beneficial and involves all levels of society, focusing on employment as an indicator of inclusive growth. Since the concept of inclusive growth relates to economic growth in term of GDP and also the inclusion in the process and outcome of growth, this study accordingly utilizes log of GDP per person employed as a proxy for inclusive growth. The variable log of GDP per person employed represents the average participation opportunities available to the population and how those opportunities are distributed within the population. Central Bureau of Statistics defines GDP growth per person employed as the average real GDP growth rate compared to the number of people employed yearly. The higher the GDP growth rate per person employed, the higher the region's inclusive growth. This study used real GRDP because of the study units at the provincial level. In addition, real GRDP or GRDP at constant prices eliminates the effects of inflation on economic growth. Furthermore, this study uses high school attainment rate as the proxy for education level in correspondence to the reviewed literature. Meanwhile, the health level variable is defined as the percentage of population with chronic and acute health complains in a month. The higher the health complains, the lower health quality level in a population. Moreover, the public investment is represented by log of realized government capital expenditure and the private investment is measured by the log of sum of realized foreign direct investment and domestic investment. In addition, structural transformation is represented by the proportion of formal sector workers in percentage, while trade openness is measured using the proportion of sum of export and import, both international and interprovincial ones, to GDP. The finding of this research shows that high school graduation rate, private investment, trade openness and formal sector employment have statistically positive and significant impacts on inclusive growth. Meanwhile, health complains has a negative and significant impact on inclusive growth. In addition, public investment has a negative and insignificant impact on inclusive growth. The findings of this study underscore the importance of human development, infrastructure development and structural transformation as policy areas of focus for inclusive growth.



Universitas Padjadjaran


Economics, Economic Development, Trade, Public Investment, Human Development, Private Investment