Basic infrastructure and income inequality in Indonesia: a spatial econometrics approach

Ardiansyah Abubakar; Arifin Arifin; Muhammad Fadillah

doi:10.22437/ppd.v14i1.54246

Authors

Ardiansyah Abubakar Department of Statistics, Faculty of Mathematics and Natural Science, Universitas Lambung Mangkurat, Indonesia
Arifin Arifin Department of Statistics, Faculty of Science and Technology, Universitas Patompo, Indonesia
Muhammad Fadillah Department of Statistics, Faculty of Mathematics and Natural Science, Universitas Lambung Mangkurat, Indonesia

DOI:

https://doi.org/10.22437/ppd.v14i1.54246

Keywords:

Basic infrastructure, Income inequality, Place-based policies, Spatial autoregressive, Spillover effects

Abstract

This study investigates the association between basic infrastructure and income inequality in Indonesia using a spatial panel econometric framework. Based on provincial panel data for 34 provinces from 2015 to 2024, the analysis first documents significant positive spatial dependence in the Gini ratio and then estimates a Spatial Autoregressive Random Effects (SAR-RE) model. The results show a positive, statistically significant spatial autoregressive coefficient (ρ = 0.1926), indicating that provincial inequality is linked to that of neighboring provinces. Better access to clean water and sanitation is associated with lower inequality, with sanitation showing the strongest equalizing effect. By contrast, GRDP continues to have a positive effect, suggesting that regional output expansion alone does not automatically yield inclusive distributional outcomes. This study contributes to the literature by applying spatial panel analysis to Indonesian provinces and by positioning basic infrastructure as an indirect human-capital channel in an archipelagic setting. Although the findings should be interpreted as associative rather than strictly causal, they highlight the importance of cross-provincial coordination in water and sanitation policy to reduce persistent regional inequality.

Downloads

Download data is not yet available.

References

Abban, O. J., Rajaguru, G., & Acheampong, A. O. (2025). The spillover effect of economic institutions on the environment: A global evidence from spatial econometric analysis. Journal of Environmental Management, 373, 123645. https://doi.org/https://doi.org/10.1016/j.jenvman.2024.123645

Acheampong, A. O., Opoku, E. E. O., & Tetteh, G. K. (2024). Unveiling the effect of income inequality on safe drinking water, sanitation and hygiene (WASH): Does financial inclusion matter? World Development, 178, 106573. https://doi.org/https://doi.org/10.1016/j.worlddev.2024.106573

Annisa, A. (2025). Econometric Spatial Modeling to Analyze Interregional Development Inequality in Indonesia. Journal of Applied Econometric, 1, 69–76. https://doi.org/10.59784/journaljoae.v1i2.26

Asamoah, L. A., Figari, F., & Vezzulli, A. (2021). Spillover effects of innovation and entrepreneurial activity on income inequality in developing countries: A spatial panel approach. Regional Science Policy & Practice, 13(5), 1661–1686. https://doi.org/https://doi.org/10.1111/rsp3.12470

Badan Pusat Statistik RI. (2025). Statistik Indonesia 2025. Jakarta: BPS

Bulty, B. G., Gotu, B., & Djira, G. (2023). A spatial panel autoregressive model specification with inverse quantile separation distances of locations. Spatial Statistics, 57, 100771. https://doi.org/https://doi.org/10.1016/j.spasta.2023.100771

Cameron, L., Santos, P., Thomas, M., & Albert, J. (2021). Sanitation, financial incentives and health spillovers: A cluster randomised trial. Journal of Health Economics, 77, 102456. https://doi.org/https://doi.org/10.1016/j.jhealeco.2021.102456

Cartone, A., Panzera, D., & Postiglione, P. (2022). Regional economic disparities, spatial dependence and proximity structures. Regional Science Policy & Practice, 14(5), 1034–1051. https://doi.org/https://doi.org/10.1111/rsp3.12482

Dewi, N. P., Novianti, T., & Hakim, D. B. (2021). Identifying spatial correlation and factors influencing regional economic growth in Southern Sumatra. Jurnal Perspektif Pembiayaan Dan Pembangunan Daerah, 9(3), 245–256. https://doi.org/10.22437/ppd.v9i3.13422

Dinda Rahmasari, F., & Ramadhani, R. (2024). Human capital and gender development in economic growth: A case study of Sumatera Barat, 2010-2022. Jurnal Perspektif Pembiayaan Dan Pembangunan Daerah, 12(5), 2338–4603. https://doi.org/10.22437/ppd.v12i5.37777

Fujita, M., & Krugman, P. (2003). The New Economic Geography: Past, Present and the Future. Review of Economic Design, 83, 139–164. https://doi.org/10.1007/s10110-003-0180-0

Gao, X., Zhu, J., Zhu, H., & Zhang, X. (2024). Spatial spillover effects of skilled migration on innovation in China. Heliyon, 10(11), e30849. https://doi.org/https://doi.org/10.1016/j.heliyon.2024.e30849

Gómez-Tello, A., Murgui-García, M.-J., & Sanchis-Llopis, M.-T. (2025). Labour productivity disparities in European regions: the impact of agglomeration effects. The Annals of Regional Science, 74(3), 69. https://doi.org/10.1007/s00168-025-01400-7

Hidayat, A., & Yulianita, A. (2025). Fiscal decentralization, monetary policy, and economic growth in Indonesia: A panel data analysis. Jurnal Perspektif Pembiayaan Dan Pembangunan Daerah, 13(4), 2355–8520. https://doi.org/10.22437/ppd.v13i4.42111

Hope, D., & Limberg, J. (2022). The economic consequences of major tax cuts for the rich. Socioeconomic Review, 20(2), 539–559. https://doi.org/10.1093/ser/mwab061

Kapetanios, G., Serlenga, L., & Shin, Y. (2023). Testing for correlation between the regressors and factor loadings in heterogeneous panels with interactive effects. Empirical Economics, 64(6), 2611–2659. https://doi.org/10.1007/s00181-023-02390-1

Kartika Sari, V. (2024). ICT expansion and human development: Empirical evidence from Indonesia. Jurnal Perspektif Pembiayaan Dan Pembangunan Daerah, 12(3), 2338–4603. https://doi.org/10.22437/ppd.v12i3.32684

Khan, M. S., & Siddique, A. B. (2021). Spatial Analysis of Regional and Income Inequality in the United States. Economies, 9(4). https://doi.org/10.3390/economies9040159

Kopczewska, K., & Elhorst, P. (2024). New developments in spatial econometric modelling. Spatial Economic Analysis, 19(1), 1–7. https://doi.org/10.1080/17421772.2023.2281173

Li, M., Yamaka, W., & Maneejuk, P. (2025). Nonlinear and Spatial Effects of Housing Prices on Urban–Rural Income Inequality: Evidence from Dynamic Spatial Threshold Models in Mainland China. Mathematics, 13(24). https://doi.org/10.3390/math13243960

Li, S., Gong, A., Yin, Y., & Su, Q. (2024). Spatiotemporal characteristics and socioeconomic inequalities in water, sanitation, and hygiene access in China from 2000 to 2020: analysis of data from three national censuses. BMC Public Health, 24(1), 3250. https://doi.org/10.1186/s12889-024-20739-8

Li, Y., Wang, Z., Lin, Z., & Gao, Y. (2025). Revisiting regional governance and regional development: Measurements, linkages and coupling effect. World Development, 185, 106816. https://doi.org/https://doi.org/10.1016/j.worlddev.2024.106816

Liu, Y., & Lian, X. (2025). The spatial spillover effect of digital economy on regional tax Revenue: An empirical study based on the decay boundary and spillover path. International Review of Economics & Finance, 102, 104352. https://doi.org/https://doi.org/10.1016/j.iref.2025.104352

Marbler, A. (2024). Water scarcity and local economic activity: Spatial spillovers and the role of irrigation. Journal of Environmental Economics and Management, 124, 102931. https://doi.org/https://doi.org/10.1016/j.jeem.2024.102931

Mendez, C., & Santos‐Marquez, F. (2021). Regional convergence and spatial dependence across subnational regions of ASEAN: Evidence from satellite nighttime light data. Regional Science Policy & Practice, 13(6), 1750–1778. https://doi.org/https://doi.org/10.1111/rsp3.12335

Notonegoro, Y., Andriyana, Y., & Ruchjana, B. N. (2024). Comparison of distance-based spatial weight matrix in modeling Internet signal strengths in Tasikma-laya regency using logistic spatial autoregressive model. International Journal of Data and Network Science, 8(2), 893–906. https://doi.org/10.5267/j.ijdns.2023.12.016

Prastiwi, D., & Khoirunurrofik, K. (2025). The spatial spillover effects of small and medium-sized enterprise clusters and industrial estates on the unemployment rate: evidence from Java. Regional Statistics, 15, 1–21. https://doi.org/10.15196/RS150201

Pronti, A., & Zoboli, R. (2024). Something new under the sun. A spatial econometric analysis of the adoption of photovoltaic systems in Italy. Energy Economics, 134, 107582. https://doi.org/https://doi.org/10.1016/j.eneco.2024.107582

Quito, B., del Río-Rama, M. de la C., Peris-Ortiz, M., & Álvarez-García, J. (2024). Spatial-Temporal Determinants of Income Inequality in the Cantons of Ecuador between 2010 and 2019: a Spatial Panel Econometric Analysis. Journal of the Knowledge Economy, 15(2), 7744–7768. https://doi.org/10.1007/s13132-023-01373-y

Ratnasari, V., Audha, S. H., & Dani, A. T. R. (2023). Statistical modeling to analyze factors affecting the middle-income trap in Indonesia using panel data regression. MethodsX, 11, 102379. https://doi.org/https://doi.org/10.1016/j.mex.2023.102379

Ren, T., Xu, L., & Ren, Z. (2024). Research on the Validity of Bootstrap LM-Error Test in Spatial Random Effect Models. Axioms, 13(6). https://doi.org/10.3390/axioms13060378

Renninger, A., O’Clery, N., & Arcaute, E. (2025). US cities are defined by rings and pockets with limited socioeconomic mixing. Nature Cities, 2(12), 1172–1182. https://doi.org/10.1038/s44284-025-00350-7

Steenbrink, R., & Skali, A. (2026). Wealth inequality and economic growth: Evidence from the World Inequality Database. World Development, 199, 107250. https://doi.org/https://doi.org/10.1016/j.worlddev.2025.107250

Szymczak, S. (2024). The impact of global value chains on wages, employment, and productivity: a survey of theoretical approaches. Journal for Labour Market Research, 58(1), 9. https://doi.org/10.1186/s12651-024-00367-w

Tobler, W. R. (1970). A Computer Movie Simulating Urban Growth in the Detroit Region. Economic Geography, 46, 234–240. https://doi.org/10.2307/143141

Wan, G., Wang, C., Zhang, X., & Zuo, C. (2024). Income inequality effect of public utility infrastructure: Evidence from rural China. World Development, 179, 106594. https://doi.org/https://doi.org/10.1016/j.worlddev.2024.106594

Wang, S., Zhang, M., Tang, N., & Ali, Q. (2024). Catalyzing sustainable development: Exploring the interplay between access to clean water, sanitation, renewable energy and electricity services in shaping China’s energy, economic growth, and environmental landscape. Heliyon, 10(10), e31097. https://doi.org/https://doi.org/10.1016/j.heliyon.2024.e31097

Wen, F., Yang, S., & Huang, D. (2023). Heterogeneous human capital, spatial spillovers and regional innovation: evidence from the Yangtze River Economic Belt, China. Humanities and Social Sciences Communications, 10(1), 365. https://doi.org/10.1057/s41599-023-01809-5

Wolf, C. (2025). The making and unmaking of uneven development: the role of anchor firms in creating and overcoming industrial decline in East Germany. Journal of Economic Geography, lbaf055. https://doi.org/10.1093/jeg/lbaf055

Yang, Z., & Lv, P. (2025). The spatial spillover effects of new infrastructure investment on sustainable innovation ecosystems: analysis based on provincial panel data in China. Digital Economy and Sustainable Development, 3(1), 21. https://doi.org/10.1007/s44265-025-00072-7

Yin, F., Qian, Y., Zeng, J., & Wei, X. (2024). The Spatial Spillover Effects of Transportation Infrastructure on Regional Economic Growth—An Empirical Study at the Provincial Level in China. Sustainability, 16(19). https://doi.org/10.3390/su16198689

Zanfack, L. T. (2025). Infrastructure Development and Inclusive Growth in Africa: What Role Does the Knowledge Economy Play? Journal of the Knowledge Economy, 16(4), 14842–14866. https://doi.org/10.1007/s13132-024-02524-5

Zhao, H., Cao, X., & Ma, T. (2020). A spatial econometric empirical research on the impact of industrial agglomeration on haze pollution in China. Air Quality, Atmosphere & Health, 13(11), 1305–1312. https://doi.org/10.1007/s11869-020-00884-w