Agriculture and regional economic growth in Indonesia

Abstract

The Republic of Indonesia consists of 34 provinces in 514 districts with diverse economic characteristics. The objective of this research is to analyze the association between agriculture sector and regional economic growth in Indonesia. The data source was from the Indonesia Database for Policy and Economic Research (INDO-DAPOER) of the World Bank. The study covered the period between 2001 and 2008. The province total gross domestic product (GDP) excluding oil and gas was used as the outcome variable. The covariates were grouped into agricultural and development variables. The agricultural variables were total agricultural credit, number of people employed in agriculture, forestry and fishery, and agriculture function expenditure. Meanwhile, the development variables were percentage of household with access to safe water and literacy rate for population age 15 and over. The data analysis method was the generalized least square multiple regression with random effects. The results of the study indicate that the Indonesia’s province GDP increased every year. In addition, higher economic growth was associated with higher total agriculture credit, larger number of people employed in agriculture, forestry and fishery, higher agricultural function expenditure, higher percentage of household with access to safe water, and higher literacy rate for population age 15 and over.