The Impact of Urban Green Spaces on Labor Productivity: Dynamic Spatial Panel Evidence from Indonesian Cities

Urban green spaces are increasingly recognized as key elements of sustainable urban development; however, their economic implications, particularly for labor productivity, remain underexplored in developing countries. This study examines the impact of urban green spaces on labor productivity across 92 Indonesian cities over the period 2014–2024, while accounting for spatial dependence and dynamic effects. Urban green space is measured using the Normalized Difference Vegetation Index (NDVI), and labor productivity is defined as the ratio of regional economic output to employment. The analysis incorporates control variables including life expectancy, environmental quality (AOD), average years of schooling, and GDP per capita. To address spatial and temporal dynamics, this study employs a Spatial Dynamic Panel Data (SDPD) framework. The results show that urban green spaces have a positive and significant effect on labor productivity. In addition, spatial spillover effects are evident, indicating that productivity in one city is influenced by conditions in neighboring areas. Socio-economic factors, particularly health, education, and economic development, also play a significant role. These findings highlight the economic relevance of urban green infrastructure and underscore the importance of integrating environmental considerations into urban policy to enhance productivity in developing country contexts.