An examination of inclusive economic growth and its factors: a case study of East Java, Indonesia

Relevance. The study of inclusive economic growth remains highly relevant as the concept of growth continues to evolve. Measuring and analysing its determinants offers opportunities to foster inclusive growth at both regional and national levels. Research objective. This study analyses inclusive economic growth in East Java's districts and cities from 2018-2022 by comparing two measurement models: the Social Mobility Curve (SMC), which focuses on income distribution and economic growth, and the Poverty Equivalent Growth Rate (PEGR), which incorporates poverty, inequality, and unemployment. Data and Methods. Using data from Statistics Indonesia (BPS), the National Labour Force Survey (SAKERNAS), and the National Socioeconomic Survey (SUSENAS) for 2018-2022, this study applies the SMC and PEGR models and conducts panel data regression to analyse inclusive growth and its determinants. Results. The findings reveal that economic growth in East Java lacks inclusivity. Income distribution inequality persists across districts and cities, as shown by the SMC results. The PEGR model also indicates ongoing challenges in reducing poverty and unemployment inclusively. Key factors such as the share of manufacturing in GRDP and employment opportunities significantly impact inclusive growth. Conclusion. Encouraging investment growth can create a favourable business climate across all districts/cities, supporting a more equitable contribution to GRDP. As employment opportunities play a significant role in inclusive growth, boosting employment through investment can improve access to education and healthcare, while addressing unemployment. To combat inequality and poverty, the government must refine its data collection on the poor to better target beneficiaries.