The Impact of Priority Sector Spending on Inclusive Economic Growth in East Java
DOI:
https://doi.org/10.31603/conference.17400Keywords:
inclusive economic growth, education expenditure, health expenditure, infrastructure expenditure, dynamic panel dataAbstract
Inclusive economic growth serves as a strategic regional agenda to accelerate equitable prosperity and mitigate inequality. Despite East Java Province being the second-largest contributor to Indonesia’s GDP in 2024 (14.39%), this achievement is not yet commensurate with its inclusive growth performance, which remains ranked 11th nationally with an IPEI score of 6.66. This disparity highlights a paradox of growth, where high economic expansion has yet to guarantee optimal welfare distribution. Consequently, this study evaluates the effectiveness of fiscal policy—specifically sectoral budget allocations for education, health, and infrastructure—across 38 regencies and municipalities in East Java from 2014 to 2024. Utilizing secondary data from the DJPK and Bappenas, the analysis employs a dynamic panel data regression model via STATA 17. The findings confirm that education and health expenditures exert a positive and significant impact on inclusive economic growth in both the short and long run. Conversely, infrastructure spending only yields a significant positive effect in the long run, suggesting a notable gestation period before physical capital investments fully materialize into inclusive outcomes.
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