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Boosting National Infrastructure Investment in West Java: An Analysis Using TERM CGE Model

Listed author(s):
  • Viktor Pirmana

    ()

    (Department of Economics, Padjadjaran University)

  • Armida Alisjahbana

    ()

    (Department of Economics, Padjadjaran University)

  • Irlan Adiyatma Rum

    ()

    (Department of Economics, Padjadjaran University)

It is well established that infrastructure investment plays significant role in the acceleration of development through its impact on growth, sector performance and socio-economic indicators. West Java Province is province with the largest population in Indonesia and main contributor to national GDP. In this study, the impact of increased national infrastructure investment in West Java Province is assessed using 2014 data. JaBarTERM5 CGE model is used to simulate two infrastructure investment scenarios, the moderate scenario or increase in government national infrastructure investment only, and the progressive scenario that combines government national infrastructure investment with private investment. The results indicate that under the moderate scenario, West Java GRDP increased by 1.91% (1.91 percentage point compared to baseline, while in the progressive scenario (national plus private infrastructure investment), GRDP increased by up to 3.58% (3.58 percentage point compared to baseline). However, there are differential responses at district level. Districts that experience the highest increase in GRDP are districts close to industrial areas in the vicinity of Jakarta and Bandung. When viewed from its impact on provincial employment, it increases by 2.27% (2.27 percentage point compared to the baseline case) under the progressive scenario. The employment impact is particularly more pronounced in districts that are industrial areas. Sectors that experience increase in their production are Cements, Papers, Textiles, Food Crops, and Transportation Services. Another result is an increase in the prices of Real Estate, and Business and Financial Services, while the price (cost) of trade and transport sector has decreased due to an increase in the access and quality of infrastructure.

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File URL: http://ceds.feb.unpad.ac.id/wopeds/201507.pdf
File Function: First version, 2015
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Paper provided by Department of Economics, Padjadjaran University in its series Working Papers in Economics and Development Studies (WoPEDS) with number 201507.

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Length: 14 pages
Date of creation: Dec 2015
Date of revision: Dec 2015
Handle: RePEc:unp:wpaper:201507
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  1. Muhammad Imran & Javeria Niazi, 2011. "Infrastructure and Growth," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 50(4), pages 355-364.
  2. Mark Horridge & Glyn Wittwer, 2007. "The economic impacts of a construction project, using SinoTERM, a multi-regional CGE model of China," Centre of Policy Studies/IMPACT Centre Working Papers g-164, Victoria University, Centre of Policy Studies/IMPACT Centre.
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