The Contribution of Road Construction on Regional Economic Development in Indonesia

Abstract

The development process in Indonesia's provinces is expected to contribute to regional economic growth. This research aims to evaluate road construction's impact on regional economic development and the spatial spillover effect in 34 Indonesian provinces. This paper constructs Spatial Autoregressive Model (SAR), Spatial Durbin Model (SDM), Spatial Autocorrelation Model (SAC), Spatial Error Model (SEM), and Generalised Spatial Random Effect Model (GSPRE) for 34 provinces in Indonesia from 2010 to 2020 to capture the effect of road construction on regional economic development and spatial spillover effect. Compared to other models, the spatial Durbin model has the minimum Akaike information criterion (AIC) value, indicating that it is the most suited model. The result indicates that road infrastructure has little impact on regional economic development. Moreover, road development has a negative value and negligible spatial spillover effect.