The driving forces of the level and the growth rate of real per capita income in Indonesia

Parjiono, Parjiono, Beg, A.B.M. Rabiul Alam, and Monypenny, Richard (2013) The driving forces of the level and the growth rate of real per capita income in Indonesia. Applied Economics, 45 (17). pp. 2389-2400.

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We investigate the driving forces behind the level and the growth rate in real per capita Gross Domestic Product (GDP) in Indonesia. The ultimate reasons and the proximate causes underlying Indonesia's economic growth since the mid-1960s are still unclear. In the literature there have been at least three ways of investigating the driving forces of economic growth in Indonesia, namely: growth accounting system, regression and causality. The difference and improvement in this article is that we employed a two-step bounds testing approach to cointegration, which has not been done before; it uses the endogenous growth model to consider 12 policy variables and two external factors that potentially affect per capita income, this number is more than that has been done before. The empirical results that we obtained using this two-step bounds testing approach help us draw policy implications that if or when implemented would be expected to increase the growth of real per capita income, as well as the welfare of the people of Indonesia. Economic growth in Indonesia is largely driven by government policy, so the ability to increase Indonesia's economic growth rate, in the long run, will largely depend on the implementation of appropriate government policies.

Item ID: 19835
Item Type: Article (Research - C1)
ISSN: 1466-4283
Keywords: Indonesia; economic growth; regional development
Funders: Government Financial Management Revenue and Administration Project (GFMRAP), Fiscal Policy Office, Ministry of Finance, Republic of Indonesia (IBRD Register number 1069 4001).
Date Deposited: 21 Feb 2012 05:45
FoR Codes: 14 ECONOMICS > 1402 Applied Economics > 140202 Economic Development and Growth @ 50%
14 ECONOMICS > 1403 Econometrics > 140302 Econometric and Statistical Methods @ 50%
SEO Codes: 91 ECONOMIC FRAMEWORK > 9101 Macroeconomics > 910103 Economic Growth @ 100%
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