The Effect of Infrastructure Expenditure on Improving the Quality of Human Development in the Western and Eastern Regions of Indonesia

Abdul Rahman, Nursini, Abd. Rahman Razak, Anas Iswanto Anwar


During the last two decades, HDI as a measure of the quality of human development has undergone changes both in terms of technical and dimensions, one of which is environmental indicators. Previous research has never tested improving the quality of human development that is integrated with economic, social, and environmental dimensions through government expenditure in the public sector. However, this study is still limited to being developed by previous researchers. This research contributes to examining the effect of public sector government expenditure, especially infrastructure expenditure (housing and public facilities functions as well as economic functions) on the quality of human development that integrates the economic, social, and environmental dimensions of AHDI. This study examined the effect of infrastructure expenditure on improving the quality of human development in KBI and KTI both directly and through economic growth and employment absorption. Researchers used the measurement of the quality of human development that integrates economic, social, and environmental dimensions. The researchers used panel data from 33 provinces in Indonesia for the period 2010 – 2020. The data were obtained from the BPS and DJPK, the Directorate General of Pollution Control and Environmental Damage, and the Ministry of Environment, and Forestry of the Republic of Indonesia. The model used is a functional equation model in simultaneous SEM with a reduced form assisted by Rstudio software. The results show that infrastructure expenditure has a positive and significant effect on the quality of human development, either directly or through economic growth, but not significantly through employment absorption. Differences in the quality of human development between KBI and KTI are both from the characteristics of the region and the effect of the variable infrastructure expenditure. The infrastructure expenditure dummy has direct and indirect effects on employment absorption. Furthermore, KTI has a greater influence on the quality of human development than KBI through employment absorption. The implication is that government policies through infrastructure expenditure can reduce the gap in the quality of human development between KBI and KTI. Additionally, expenditure is directed at improving environmental factors, as well as focusing on improving the quality of human development that can be achieved equitably.


Keywords: infrastructure expenditure, quality of human development, economic growth, employment absorption.

Full Text:



ABU BAKAR, N.A., & CHE MAT, S.H. (2017). The Effects of Infrastructure Development on Economic Growth in the Northern States of Malaysia. Quest Journals - Journal of Research in Humanities and Social Science, 5(9), 28–32. Retrieved from

AGENOR, P.-R., & MORENO-DODSON, B. (2006). Public Infrastructure And Growth : New Channels And Policy Implications, Policy Research Working Papers. The World Bank.

AKINBODE, S., OLABISI, J., ADEGBITE, R., ADEREMI, T., & ALAWODE, A. (2020). Corruption, Government Effectiveness and Human Development in Sub-Saharan Africa. Journal for the Advancement of Developing Economies, 9(1), 16–34.

ARFIYANSYAH, S. (2018). Analisis Pengaruh Pengeluaran Pemerintah Terhadap Indeks Pembangunan Manusia Melalui Pendapatan Domestik Regional Bruto di Indonesia. Indonesian Treasury Review Jurnal Perbendaharaan Keuangan Negara dan Kebijakan Publik, 3(4), 270–283.

ARROW, K.J., & KURZ, M. (1970). Public investment, the rate of return, and optimal fiscal policy. The Johns Hopkins University Press. Retrieved from

ASCHAUER, D.A. (1989). Is public expenditure productive? Journal of Monetary Economics, 23(2), 177–200.

BARRO, R.J. (1990). Government Spending in a Simple Model of endogenous growth. Journal of Political Economy, 98(5), 103–125.

CARVALHO, A., NEPAL, R., & JAMASB, T. (2015). Economic reforms and human development: evidence from transition economies. Applied Economics, 48(14), 1330–1347.

COSTANZA, R., D'ARGE, R., DE GROOT, R., FARBER, S., GRASSO, M., HANNON, B., LIMBURG, K., NAEEM, S., O'NEILL, R.V., PARUELO, J., RASKIN, R. G., SUTTON, P., & VAN DEN BELT, M. (1997). The value of the world’s ecosystem services and natural capital. Nature, 387(6630), 253–260.

DE LA VEGA, M.C.L., & URRUTIA, A.M. (2001). HDPI: A framework for pollution-sensitive human development indicators. Environment, Development and Sustainability, 3, 199–215.

DÉMURGER, S. (2001). Infrastructure Development and Economic Growth: An Explanation for Regional Disparities in China? Journal of Comparative Economics, 29(1), 95–117.

DERVIS, K., & KLUGMAN, J. (2011). Measuring human progress: The contribution of the Human Development Index and related indices. Revue d’Economie Politique, 121(1), 73–92.

DESAI, M. (1991). Human development. Concepts and measurement. European Economic Review, 35(2–3), 350–357.

EBUH, G.U., EZIKE, I.E., SHITILE, T.S., SMITH, E.S., & HARUNA, T.M. (2019). The Infrastructure–Growth Nexus in Nigeria: A Reassessment. Journal of Infrastructure Development, 11(1–2), 41–58.

EDEME, R.K. (2014). Analyzing the effects of sectoral public spending on human development in Nigeria: Evidence from panel data. IOSR Journal of Humanities and Social Science, 19(9), 1–13.

EDEME, R.K., & NKALU, C.N. (2019). Public expenditure and human development in Nigeria in the last decade, composition and distributional impacts. Economics and Business Letters, 8(2), 62–73.

ESTACHE, A., & FAY, M. (2009). Current Debates on Infrastructure Policy. Washington: The World Bank Policy Research Working Paper, 4410, 151–194. Retrieved from

FADILAH, A., ANANDA, C.F., and KALUGE, D. (2018). A Panel Approach : How Does Government Expenditure Influence Human Development Index ? Jurnal Ekonomi dan Studi Pembangunan, 10(2), 130–139. Retrieved from

FATTAH, S., & MUJI, A. (2012). Local Government Expenditure Allocation toward Human Development Index at Jeneponto Regency, South Sulawesi, Indonesia. IOSR Journal of Humanities and Social Science, 5(6), 40–50.

FARIDI, M.Z., CHAUDHRY, M.O., & RAMZAN, M. (2015). Role of Infrastructure in Poverty Alleviation : Evidence from Pakistan. Pakistan Journal of Social Sciences, 35(2), 533–542. Retrieved from

FEDDERKE, J.W., PERKINS, P., & LUIZ, J.M. (2006). Infrastructural investment in long-run economic growth: South Africa 1875-2001. World Development, 34(6), 1037–1059.

FORD, R., & PORET, P. (1991). Infrastructure and Private- Sector Productivity. OECD Economics Department Working Papers, 91, 63–89.

HERINOTO, H., & ZULFANETTI, Z. (2021). Faktor penentu indeks pembangunan manusia dan hubungannya dengan belanja infrastruktur serta pertumbuhan ekonomi Kabupaten/Kota Provinsi Jambi. Jurnal Paradigma Ekonomika, 16(2), 343–358.

HERRERO, C., MARTÍNEZ, R., & VILLAR, A. (2010). Multidimensional social evaluation: An application to the measurement of human development. Review of Income and Wealth, 56(3), 483–497.

HERRERO, C., MARTÍNEZ, R., & VILLAR, A. (2012). A Newer human development index. Journal of Human Development and Capabilities, 13(2), 247–268.

HIRAI, T. (2017). The Creation of the Human Development Approach. Springer International Publishing.

HIRSCHMAN, A.O. (1957). Association Investment Policies and “Dualism” in Underdeveloped Countries. The American Economic Review, 47(5), 550–570.

HOOPER, D., COUGHLAN, J., & MULLEN, M. R. (2008). Structural equation modeling: Guidelines for determining model fit. Electronic Journal of Business Research Methods, 6(1), 53–60.

HOLTZ-EAKIN, D., & SCHWARTZ, A. E. (1995). Infrastructure in a structural model of economic growth. Regional Science and Urban Economics, 25(2), 131–151.

KARNITIS, E., BICEVSKIS, J., & KARNITIS, G. (2021). Measuring the Implementation of the Agenda 2030 Vision in Its Comprehensive Sense: Methodology and Tool. Energies, 14(4), 856.

KOVACEVIC, M.S. (2011). Review of HDI Critiques and Potential Improvements. Human Development Research Paper, 2010(33), 2. Retrieved from

KUSHARJANTO, H., & KIM, D. (2011). Infrastructure and human development: The case of Java, Indonesia. Journal of the Asia Pacific Economy, 16(1), 111–124.

LUCAS, R.E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3–42.

LUU, H.N., NGUYEN, N.M., HO, H.H., & TIEN, D.N. (2019). Infrastructure and economic development in developing economies: New empirical evidence from night-time satellite imagery in Vietnam. International Journal of Social Economics, 46(4), 581–594.

MARYANINGSIH, N., HERMANSYAH, O., & SAVITRI, M. (2014). The Role of Infrastructure on Economic Growth in Indonesia. Bulletin of Monetary, Economics, and Banking, 17(1), 55–88.

MCDONALD, R., & HO, M.-H. (2002). Principles and Practice in Reporting Structural Equation Analyses. Psychological methods, 7, 64–82.

MILES, J., & SHEVLIN, M. (2007). A time and a place for incremental fit indices. Personality and Individual Differences, 42(5), 869–874.

MOHANTY, R., & BHANUMURTHY, N. (2018). Assessing Public Expenditure Efficiency at Indian States. National Institute of Public Finance and Policy Working Papers, 225, art. 1818. Retrieved from

MOHANTY, A.K., NAYAK, N.C., & CHATTERJEE, B. (2016). Does Infrastructure Affect Human Development? Evidences from Odisha, India. Journal of Infrastructure Development, 8(1), 1–26.

MORSE, S. (2003). Greening the United Nation’s human development index? Sustainable Development, 11(4), 183–198.

MORSE, S. (2014). Stirring the pot. Influence of changes in methodology of the Human Development Index on reporting by the press. Ecological Indicators, 45, 245–254.

MUNNELL, A.H. (1990). How Does Public Infrastructure Affect Regional Economic Performance? New England Economic Review, September, 11–33. Retrieved from

NEUMAYER, E. (2001). The human development index and sustainability - A constructive proposal. Ecological Economics, 39(1), 101–114.

NEUMAYER, E. (2012). Sustainability and Inequality in Human Development. SSRN Electronic Journal.

OUATTARA, B., & ZHANG, Y.F. (2019). Infrastructure and long-run economic growth: evidence from Chinese provinces. Empirical Economics, 57(1), 263–284.

RAHMAH, A., & NOORASIAH (2012). Globalisation and Labour Productivity in the Malaysian Manufacturing Sector. Review of Economics & Finance, 9(4), 3235–3242. Retrieved from

RAMATHAN, B. (1999). Environment Sensitive Human Development Index: Issues and Alternatives. Indian Social Sciences Review, 1, 193–201.

RANIS, G., & STEWART, F. (2005). Dynamic Links between the Economy and Human Development. DESA Working Paper, 050(8), 1–16. Retrieved from

RAY, M. (2014). Redefining the Human Development Index to Account for Sustainability. Atlantic Economic Journal, 42, 305–316.

ROMER, P.M. (1986). Increasing Returns and Long-Run Growth. The Journal of Political Economy, 94(5), 1002–1037. Retrieved from

ROMER, P.M. (1990). Endogenous technological change. Journal of Political Economy, 98(5), S71–S102.

ROSENSTEIN-RODAN, P. (1943). Problems of Industrialisation of Eastern and South-Eastern Europe. The Economic Journal, 53(210/211), 202–211.

SAPKOTA, J.B. (2014). Access to Infrastructure and Human Development: Cross-Country Evidence. Working Papers, 70. Retrieved from

SERVÉN, L., & CALDERÓN, M.C. (2004). The Effects of Infrastructure Development on Growth and Income Distribution. Documentos de Trabajo (Banco Central de Chile), 270, 1–47.

SLESMAN, L., BAHARUMSHAH, A.Z., & RA’EES, W. (2015). Institutional infrastructure and economic growth in member countries of the Organization of Islamic Cooperation. Economic Modelling, 51, 214–226.

SULEIMAN, N.N., & ALBIMAN, M.M. (2014). Dynamic relationship between tourism, trade, infrastructure, and economic growth: Empirical evidence From Malaysia. Journal of African Studies and Development, 6(3), 49–55.

TACHIWOU, A.M., & HAMADOU, O. (2011). Infrastructure Development and Economic Growth in Togo. International Journal of Economics and Finance, 3(3), 131–138.

TOGTOKH, C., & GAFFNEY, O. (2010). 2010 Human Sustainable Development Index: Web-magazine of the United Nations University. Our World. Retrieved from

VÄLILÄ, T. (2020). Infrastructure and growth: A survey of macro-econometric research. Structural Change and Economic Dynamics, 53, 39–49.

VYTAUTAS, I., & SIMKUNAITE, I. (2009). Socio-economic impact of infrastructure investments. Engineering Economics, 3(63), 16–25.

WAHYUDIN, A.A., & SUHAB, S. (2015). Pengeluaran Publik Dan Pembangunan Manusia Di Sulawesi Selatan Public Expenditure and Human Development in South Sulawesi. E-Journal Program Pascasarjana Universitas Hasanuddin, 1–13. Retrieved from

YUNIASIH, A.F., FIRDAUS, M., & FAHMI, I. (2013). Disparitas, Konvergensi, dan Determinan Produktivitas Tenaga Kerja Regional di Indonesia. Jurnal Ekonomi dan Pembangunan Indonesia, 14(1), 63–81.


  • There are currently no refbacks.