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

Abstract

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.


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