The impact of the quality of democracy on the economic growth of provinces in Indonesia

https://doi.org/10.35912/jgas.v1i2.626
Published: Jul 29, 2021

Abstract:

Purpose: The impact of democracy on economic growth is an interesting study of economic institutions and there is still debate about the impact on economic growth. One side of the research finds that democracy has a significant and positive impact on economic growth, but the other side states that the improvement of the country's democracy causes economic growth to decline. This study aims to examine the impact of the quality of democracy on economic growth at the provincial level in Indonesia.

Research methodology: The data used in this study use panel data using the Eviews 9.0 analysis tool, so that the best method named the Random Effect Model is obtained.

Result: The results show that democracy in Indonesia has a significant impact on economic growth and there is a positive trend in the long run. Other variables used are labor and foreign investment, which statistically, if these variables occur, can increase economic growth in Indonesia and increase employment and data on foreign investment play a role in driving economic growth. Economic growth in Indonesia is already in good condition and the economic growth that occurs is convergence growth which shows that some provinces that are poor/underdeveloped can catch up with developed provinces.

Limitations: This study uses fairly short time-series data, so that the addition of a longer time-series will of course give better results.

Contribution: Improvements in democracy in Indonesia should also strengthen democratic norms that apply in society, such as reducing corrupt behaviors, especially political corruption and money politics to get public office because if this behavior cannot be corrected, then democracy will have little impact on the economy.

Keywords:
1. Economic growth
2. Quality of democracy
3. Random effect model
Authors:
1 . Nairobi Nairobi
Department of Economic and Development Studies, Faculty of Economics and Business, University of Lampung, Bandar Lampung, Indonesia
2 . Nur Rita Santi
Department of Economic and Development Studies, Faculty of Economics and Business, University of Lampung, Bandar Lampung, Indonesia
3 . Fadeli Yusuf Afif
Department of Economic and Development Studies, Faculty of Economics and Business, University of Lampung, Bandar Lampung, Indonesia
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How to Cite
Nairobi, N., Santi, N. R., & Afif, F. Y. (2021). The impact of the quality of democracy on the economic growth of provinces in Indonesia. Journal of Governance and Accountability Studies, 1(2), 121–132. https://doi.org/10.35912/jgas.v1i2.626
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Issue & Section
Vol. 1 No. 2 (2021): July
Articles
References

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    Badan Pusat Statisitik. (2020). Statistik Politik Indonesia. https://www.bps.go.id/publication.html?Publikasi%5BtahunJudul%5D=&Publikasi%5BkataKunci%5D=demokrasi&Publikasi%5BcekJudul%5D=0&yt0=Tampilkan

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  1. Acemoglu, D., Naidu, S., Restrepo, P., & Robinson, J. A. (2019). Democracy does cause growth suresh naidu pascual restrepo. Journal of Political Economy, 127(1), 47–100.
  2. Badan Pusat Statisitik. (2020). Statistik Politik Indonesia. https://www.bps.go.id/publication.html?Publikasi%5BtahunJudul%5D=&Publikasi%5BkataKunci%5D=demokrasi&Publikasi%5BcekJudul%5D=0&yt0=Tampilkan
  3. Baltagi, B. H. (2015). Panel Data. Oxford University Press.
  4. Colagrossi, M., Rossignoli, D., & Maggioni, M. A. (2017). Does democracy cause growth? A meta-analysis perspective. CSCCWorking Papers 03/17. http://centridiricerca.unicatt.it/cscc-cscc2017-03issn.pdf
  5. Doucouliagos, H., & Uluba?o?lu, M. A. (2008). Democracy and economic growth: A meta-analysis. American Journal of Political Science, 52(1), 61–83. https://doi.org/10.1111/j.1540-5907.2007.00299.
  6. F.Helliwell, J. (1992). Empirical linkage between democracy amd economic growth. In Nber Working Paper Series.
  7. Freedman, A., & Tiburzi, R. (2012). Progress and Caution: Indonesia's Democracy. Asian Affairs(UK), 39(3), 131–156. https://doi.org/10.1080/00927678.2012.704832
  8. Gujarati, D. N., & Porter, D. . (2009). Single-equation regression models. In Introductory Econometrics: A Practical Approach (5th ed.). Douglas Reiner.
  9. Heo, U., & Tan, A. C. (2001). Democracy and economic growth: A causal analysis. Comparative Politics, 33(4), 463–473. https://doi.org/10.2307/422444
  10. Huntington, S. P., & Fukuyama, F. (2006). Political order in changing societies. In political order in changing societies. https://doi.org/10.5771/0506-7286-1970-2-257
  11. Jaunky, V. C. (2013). Democracy and economic growth in Sub-Saharan Africa: A panel data approach. Empirical Economics, 45(2), 987–1008. https://doi.org/10.1007/s00181-012-0633-x
  12. Kim, N. S., & Heshmati, A. (2019). The relationship between economic growth and democracy: alternative representations of technological change. Panel Data Econometrics, 10880, 885–929. https://doi.org/10.1016/b978-0-12-815859-3.00028-7
  13. Levine, R., & Renelt, D. (1992). A sensitivity analysis of cross-country growth regressions. American Economic Review, 82(4), 942–963. https://doi.org/10.2307/2117352
  14. Mankiw, N. G. (2019). Macroeconomis, 10th Edition. In Worth Publishers.
  15. Masaki, T., van de Walle, N., Masaki, T., & van de Walle, N. (2015). The impact of democracy on economic growth in Sub-Saharan Africa, 1982–2012. The Oxford Handbook of Africa and Economics, March, 658–674. https://doi.org/10.1093/oxfordhb/9780199687114.013.13
  16. Michael, R. S., & Etta, W. (2016). Indonesia's centripetal democracy and economic growth. World Development, 37(2), 1–31.
  17. Moricz, S., & Sjöholm, F. (2014). The effect of elections on economic growth: results from a natural experiment in Indonesia. IFN Working Paper, 1023.
  18. Polterovich, V., & Popov, V. (2007). Democratization, quality of institutions and economic growth. TIGER Working Paper Series, No. 102. https://doi.org/10.1002/j.2326-1951.1962.tb00530.x
  19. Rachdi, H., & Saidi, H. (2015). Democracy and economic growth: evidence in mena countries. Procedia - Social and Behavioral Sciences, 191, 616–621. https://doi.org/10.1016/j.sbspro.2015.04.644
  20. Roe, T. (2003). Determinants of economic growth: a cross?country empirical study. American Journal of Agricultural Economics, 85(4), 1087–1088. https://doi.org/10.1111/1467-8276.t01-3-00513
  21. Shabbir, G. (2017). Corruption, democracy and economic growth: does conditionality matter? Pakistan Economic and Social Review, 55(1), 99–117. https://search.proquest.com/docview/2038608565?accountid=17242
  22. Tavares, J., & Wacziarg, R. (2001). How democracy affects growth. European Economic Review, 45(8), 1341–1378. https://doi.org/10.1016/S0014-2921(00)00093-3
  23. Todaro, M. P., & Smith, S. C. (2015). Economic development. In Pearson. https://doi.org/10.26417/ejes.v3i1.p133-142.