Regional Economic Growth: A Spatial Durbin Model Approach

Abstract

The purpose of this study is to determine the effect of spatial dependence on Gross Regional Domestic Product (GRDP) in Central Java Province. Spatial Durbin Model (SDM) is a regression model consisting of a spatial data structure which is the development of the Spatial Autoregressive Model (SAR). There is an additional spatial effect on the component of the independent variable that is not included in the SAR model or commonly referred to as an indirect effect on the independent variable. This indicates that SDM has advantages compared to SAR because there are spatial effects on the dependent and independent variables, the spatial weighted matrix used in this study is row-normalized binary contiguity. The data used in this study is sourced from the Central Java Statistics Agency (BPS) in 2019 for 35 districts and cities, which GRDP as the dependent variable, labor, human resources, and road infrastructure as independent variables. Based on the results of the analysis, the AIC value shows that SDM is significantly better than the ordinary least square (OLS) and SAR models. SDM results show that human resources have a positive sign and a direct effect of 88.5 percent and an indirect effect of 13.1 percent. In addition, the labor variable has an indirect effect on GRDP of 22.2 percent.