Does Investment and Energy Infrastructure Influence Convergence in Sumatra Island, Indonesia?

Muhammad Hidayat, Nasri Bachtiar, Sjafrizal Sjafrizal and Elvina Primayesa
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Muhammad Hidayat: Doctoral Student in Economics, Faculty of Economics and Business, Andalas University, Padang, Indonesia; & Department of Economics, Faculty of Economics and Business, Universitas Muhammadiyah Riau, Pekanbaru, Indonesia
Nasri Bachtiar: Department of Economics, Faculty of Economics and Business, Andalas University, Padang, Indonesia.
Sjafrizal Sjafrizal: Department of Economics, Faculty of Economics and Business, Andalas University, Padang, Indonesia.
Elvina Primayesa: Department of Economics, Faculty of Economics and Business, Andalas University, Padang, Indonesia.

International Journal of Energy Economics and Policy, 2022, vol. 12, issue 4, 274-281

Abstract: This research aims to prove the existence of a convergence process and analyse the effect of investment and energy infrastructure on the convergence process on Sumatra Island by including the element of space to understand spatial convergence better. The dataset used in panel data consists of 154 regions (district/municipality) from 2010 to 2020. The analytical tools used with a spatial econometric approach consist of Spatial Autoregressive (SAR) and Spatial Error Model (SEM). The results of the convergence test prove that there is convergence in both absolute and conditional convergence, and there is a difference in the speed of convergence for the two equations. Meanwhile, the results of the spatial approach state that there are spatial dependencies so that neighbouring regions influence the region. The estimation results of conditional -convergence reveal that investment and government spending in infrastructure has a positive and significant effect, in contrast to energy infrastructure, which has a negative and significant relationship, and only human capital is not significant to the convergence process in Sumatra.

Keywords: Convergence; Investment; Energy Infrastructure; Spatial Panel Data; Sumatra (search for similar items in EconPapers)
JEL-codes: C33 D63 H54 Q43 R11 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:2022-04-30

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