Factors Affecting Economic Growth in Java Island Using Panel Data Regression

Abstract

Economic growth is one of the important indicators used to evaluate the success of a country’s economic development. Economic growth in Indonesia is not only shaped by a single region but is also the result of contributions from all regions within the country. In the 2018-2022 period, Java Island made the largest contribution to Indonesia’s economic growth, with an average exceeding 50%. However, economic growth on Java Island is still experiencing fluctuations due to various factors. The purpose of this research is to estimate and identify the factors that affect economic growth on Java Island in 2018-2022. This research uses independent variables, which are investment, labor productivity, tax ratio, and ICT usage, while the dependent variable is economic growth. The research data is secondary data that was obtained from the Indonesian Central Bureau of Statistics. The data type is panel data , which consists of six provinces in Java Island spanning the time period from 2018-2022. The analysis method used is panel data regression using the Common Effect Model (CEM), Fixed Effect Model (FEM) and Random Effect Model (REM) approaches. The results show that Fixed Effect Model (FEM) is the best model for estimating economic growth on Java Island, with an adjusted-R² value of 99.80%. The other results show that simultaneously there is a significant influence between investment, labor productivity, tax ratio, and ICT usage on the economic growth in Java Island from 2018-2022.