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Does Geographic Factors Determine Local Economic Development?

  • Brata, Aloysius Gunadi

The purpose of this paper is to analyze the influence of geographic characteristics on the local economic development. There are two important reasons related to that objective. First, study on this topic in the case of Indonesia is rather limited, especially in the field of local economic development of the country. Second, geographically, Indonesia is a heterogeneous country and its consequence is development policy should also consider the geographic characteristics of the country. The study estimates impact of some geographic variables on the Gross Domestic Regional Product (GDRP) per capita and GDRP density as indicators of local economic development with data of the districts in the Central Java province uses regression models. Geographic variables used in the model are distance to economic centres, location of districts, and a measure of clustering of economic activity. Other socio-economic variable is also used in the model, such as literacy rate which is one of the components of human development index (HDI). This study found that in general geography influences local economic performance; however, geography is not the only determinant of economic performance. It also suggests that study on geographic inequality not only apply “per capita approach” but also “density approach” to get a more comprehensive picture of the impact of geography on economic development.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15817.

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Date of creation: Jun 2009
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Handle: RePEc:pra:mprapa:15817
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  1. Somik Vinay Lall & Sanjoy Chakravorty, 2005. "Industrial Location and Spatial Inequality: Theory and Evidence from India," Review of Development Economics, Wiley Blackwell, vol. 9(1), pages 47-68, 02.
  2. Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," International Trade 0103003, EconWPA.
  3. Henderson, J. Vernon & Shalizi, Zmarak & Venables, Anthony J., 2000. "Geography and development," Policy Research Working Paper Series 2456, The World Bank.
  4. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  5. Allen J. Scott, 2009. "World Development Report 2009: reshaping economic geography," Journal of Economic Geography, Oxford University Press, vol. 9(4), pages 583-586, July.
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