THE ROLE OF PUBLIC INFRASTRUCTURE ON ECONOMIC GROWTH AND INCOME INEQUALITY IN INDONESIA

Abstract

The aim of the study is to analyze the impact of public infrastructure development on economic growth,
poverty and income inequality. Unlike most extant studies which study impact of infrastructure funding on Growth,
poverty and income inequality, we formulate each kind of infrastructures utilizing indices which is the novelty of the
study. Indonesia is one of the fourth largest population countries in the world, with income inequality still high. Between
the rate of growth and the percentage of the poor and the income inequality index in Indonesia, there is a wide disparity,
especially in the income inequality index. This means that the pace of economic growth is not able to reduce income
inequality in Indonesia optimally. So the issue of inequality continues to be a socioeconomic issue in Indonesia. To prove
the phenomenon of income inequality in Indonesia this study conducted a data panel study from 2010-2017 in thirty-three
provinces in Indonesia. This research model uses the usual recursive research model with infrastructure development as
dependent variables and variables of economic growth, and income inequality as independent variables. Findings of the
study is that the construction of basic infrastructure which composed of clean water, electricity and sanitation are worth a
significant impact on the increase in population per capita income (GDP per capita), whereas knowledge infrastructure has
a positive effect on the increase in population per capita income (GDP per capita) but it is not significant. Connectivity
infrastructure which composed of road length (km) and the number of sea ports have a significant impact on the increase
in population per capita income (GDP per capita). Whereas the knowledge infrastructure which composed of school
Elementary school (SD) andSecondary School (SLTP) can reduce income inequality in Indonesia.