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Open Access Research Article

The Effect of Infrastructure Development on Economic Growth in Tapal Kuda Areas

Wahyudiyono*, Teguh Hadi Priyono and Endah Kurnia Lestari Faculty of Economics and Business, University of Jember, Indonesia Abstract: Infrastructure development is basically divided into two, namely: economic *Corresponding Author infrastructure and social infrastructure. The availability of infrastructure also greatly Wahyudiyono determines the level of efficiency and effectiveness of economic activities and is a prerequisite for the rotation of the economy to run smoothly. The purpose of this study was Article History to determine the Regional Characteristics and Development of Infrastructure Development Received: 25.12.2020 and the influence of infrastructure development on economic growth in the Tapal Kuda Accepted: 12.01.2021 area, as well as infrastructure development strategies to support economic growth in the Published: 30.01.2021 Tapal Kuda area. The research method used in achieving the objectives of this study is descriptive statistical test, panel data regression analysis. The variables used for the Citations: regression analysis consist of GRDP, number of electricity users, length of roads, budget for health and education facilities and clean water users. The results of panel data regression Wahyudiyono, Priyono, T.H., & Lestari, E.K (2021). The Effect of analysis in this study indicate that the length of roads, spending on health, the use of water Infrastructure Development on sanitation have a significant positive effect in influencing economic growth and spending on Economic Growth in Tapal Kuda Areas education shows a significant negative effect. Meanwhile, the use of electricity does not . Hmlyan Jr Eco Bus Mgn; 2(1) 31-41. show a significant effect on economic growth in the Tapal Kuda area.

Keywords: physical infrastructure, economic infrastructure, social infrastructure, economic growth, the Tapal Kuda area, panel regression.

NTRODUCTION level of efficiency and effectiveness of economic I activities in this century, because infrastructure itself is Infrastructure development has an important role in one of the ingredients in the process of production building the economy of a region or region. Some of the activities. roles of infrastructure development in building the economy, namely increasing economic growth, Empirically, the relationship between infrastructure reducing poverty, reducing production costs, and development and economic growth is still a debate and improving the quality of life of the people (Ullah & the object of intensive research (Calderón & Servén, Naveed, 2012; Raihan, 2011; Boccanfuso, Joanis, 2004; Khan et al., 2020). Maryaningsih, Hermansyah, Paquet, & Savard, 2015). Apart from that, infrastructure & Savitri, (2014) in their research explained that development is also considered to increase infrastructure development can increase per capita competitiveness, efficiency and economic productivity income which in turn can encourage economic growth. in the region. This is because infrastructure (Kodongo & Ojah, 2016) in their research also found development can reduce the distribution costs of that infrastructure development in Sub-Saharan African production products and raw materials for production, countries can increase economic development and so that production costs can be minimized and can be economic efficiency due to easy access, as well as good converted into capital to increase productivity. In quality infrastructure. while research conducted by Shi, addition, increasing productivity can further lead to Guo, & Sun, (2017) provides reinforcement related to increased demand for labor and employment. Some of the positive relationship between infrastructure and these impacts then had a positive impact on economic economic growth. In addition, (Jan, Chani, Pervaiz, & growth in the region (Khan, Khan, Jiang, & Khan, Chaudhary, 2012) in their research also found that 2020). economic growth and infrastructure development have a positive and significant relationship in the long term. When viewed from its form, infrastructure This is because infrastructure development has long- development is divided into two, namely: economic term benefits and also has a long development time so infrastructure and social infrastructure. Economic that the economic impact is long-term. On the other infrastructure, namely physical infrastructure, both used hand, research conducted by Younis (2016) found that in the production process and utilized by the infrastructure investment in the economy has a negative community, includes all public infrastructure such as impact on economic growth in the long term, and in the electricity, telecommunications, irrigation, short term the impact is less effective. transportation, clean water and sanitation and waste disposal. Meanwhile, social infrastructure is social Then from a theoretical perspective, the relationship infrastructure such as education and health. Therefore, between economic growth and infrastructure the availability of infrastructure also determines the

Wahyudiyono; Hmlyan Jr Eco Bus Mgn; Vol-2, Iss- 1 (Jan-Feb, 2021): 31-41 development can be described in anew growth theory. Regencies. The development of the first area is New growth theory is a derivative of the economic more focused on developing settlements, trade growth theory put forward by Sollow and Swan, which and services, ports (warehousing or container considers thatfactors technology (infrastructure)become terminals), industry and tourism. exogenous, which means that infrastructure 2. The second development area is the central development becomes gifen (Maryaningsih et al., region, namely Bodowoso Regency. The 2014). Meanwhile in new growth theory explains that development in this area is more for the infrastructure is endogenous which is part of investment agricultural products of the coffee, garlic and (Masoud, 2014). The new growth theory explains that organic rice. infrastructure is used as an input that can affect 3. Development area three is the southern area of aggregate output and the source of the emergence of the east west corridor of Banyuwangi and positive externalities in infrastructure development in Jember Regencies. Development in this area is the form of accessibility, convenience, efficiency and centered on urban areas with the demination of productivity (Hulten & Robert, 1991; Soyer, Ozgit, & settlements, trade and services, industry in the Rjoub, 2020). government.The 4. fourth development area is the southern part of The Tapal Kuda area is the easternmost area in East Lumajang Regency with the development of Java Province. Areas that are included in the Tapal conservation and settlements, the development Kuda Zone include Banyuwangi, Bondowoso, Jember, of horticultural agriculture and tourism. Lumajang, Pasuruan, Probolinggo, Situbondo and Probolinggo City districts. The naming of the Tapal The development of the development of this area Kuda area is caused by the shape of the map which is can be the capital for optimal economic growth so that almost similar to the shape of a Tapal Kuda. When there is an even distribution of economic growth. Based viewed from the development area in the Tapal Kuda on the Regional Medium-Term Development Plan Area, it is divided into four, namely: (RPJMD) in the Tapal Kuda Area, it supports 1. The first development area is a special infrastructure development as an effort to increase development area for the pantura which consists economic growth. thus, infrastructure becomes the of Probolinggom Situbondo and Banyuwangi capital in increasing economic activity.

Figure 1. Economic Growth in the Tapal Kuda Area and East Java Province in 2018 (Source: BPS, 2019)

In Figure 1 shows that the Tapal Kuda area is an The availability of infrastructure in the Tapal Kuda area with economic growth that is generally almost the area is shown in Table 1. Development of Physical same as the level of economic growth in the province of Infrastructure in the Tapal Kuda area 2016-2019. In East Java, which reaches 5 % percent except Table 1, it is shown that the use of electricity in the Probolinggo Regency. This condition shows that Tapal Kuda area in each district has a different economic activity in the Tapal Kuda region has a good proportion. The three largest electricity-consuming prospect and development. Apart from good economic districts in the Tapal Kuda area are Jember, then growth, the Tapal Kuda Area also has great natural Banyuwangi and Pasuruan. However, most of the potential as a driving force for tourism. This is because electricity usage in each area is used by household good natural resources can be a potential driver of activities and for production activities in the industrial economic activity. The government assesses that the and business sector (BPS Kabupaten Jember, 2018; development of the tourism sector is balanced with the BPS Kabupaten Banyuwangi 2018; BPS Kabupaten provision of various infrastructures to encourage Bondowoso, 2018; BPS Kabupaten Situbondo, 2018). productive activities in the community in order to balance the demand for the tourism sector.

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Table 1. Development of Physical Infrastructure in Tapal Kuda Area at 2016-2019 Year

District 2016 2017 2018 2019 Number of Subscribers State Electricity Company (PLN) 497211 521966

Banyuwangi 420804 472730 183129 194781

Bondowoso 221402 172890 171279 162477

Situbondo, 202584 160800 640687 668097

Jember, 705749 879919 Lumajang 42 801 141065 45753 306 571 333250 350942 Probolinggo 369988 315134 415683 435001 Pasuruan 452520 397365 179256 186799 Kota Probolinggo 196242 67258 Number of Subscribers Water Banyuwangi 50 123 51 582 55 878 49 655 Bondowoso 17 807 20 199 18 772 24 876 29653 31427

Situbondo 32753 27991 Jember 33 115 34 357 36 458 39 447 Lumajang 27 830 29 659 31 457 32 400 Probolinggo 20 715 20514 20589 21959 Pasuruan 24157 24 755 24 830 25 911 Kota Probolinggo 18252 18 698 19303 19938 Road Infrastructure 2771.25 2771.25 2771.25 Banyuwangi 2771.30 1395.28 1464.16 Bondowoso 1464.16 1395.28 1094.30 1094.30 1073.22 Situbondo, 1094.30 2972.36 2972.36 2972.36 2695.75 1109.00 Jember,Lumajang 1109.00 1051.99 1109. 00 Probolinggo 891.48 891.48 891.48 860.06 Pasuruan 2315.89 2504.73 2504.73 2504.73 Probolinggo City 221.15 221.45 221.45 221.45 Source: BPS, (2020)

In addition to the development of electricity use in almost no development in road length. This is due to a each region, Table 1 also describes the development of decrease in the quality of roads in the City of the use of clean water provided by PDAM in Tapal Probolinggo. On the other hand, the availability and Kuda areas and also the development of the length of quality of roads in an area can affect economic activity, the road in the Tapal Kuda area. The use of clean water through accessibility, efficiency in production activities, in the Tapal Kuda area is mostly used for household, economic efficiency, and further influence the commercial and office activities. This shows that most economic development of the region (Banerjee, Duflo, of the use of clean water in the Tapal Kuda area is used & Qian, 2020; Wang, Lim, Zhang, Zhao, & Lee, 2020). for productive activities. Meanwhile, the development While the development of government spending used to of road length in the Tapal Kuda area shows that every provide social infrastructure such as health and year in 2016-2019 each region has an additional road education have shown in Table 2. length except for the City of Probolinggo which has

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Table 2. Development of Social Infrastructure in the Tapal Kuda Area of the Year 2016-2019

District 2016 2017 2018 2019 Government Spending on Healthcare Infrastructure 392845054279.00 393471280793.00 Banyuwangi 508925167447.00 391128491373.49 243281658396.54 290075104870.00 Bondowoso 388829539654.10 260756576662.78 270092560334.05 221672303927.13 Situbondo 320752277240.11 280366773334.79 682503866356.66 846423814705.92 Jember, 917971647728.39 124425906603.52 262745864637.00 353210428606.00 Lumajang 398964285935.00 75338289228.45 301399496699.21 312064720563.40 Probolinggo 399609436068.00 304336723236.31 451753066059.65 402740300583.00 Pasuruan 577224284900.40 529632927533.54 234791785582.41 223273575734.89 Probolinggo City 356637334064.21 115423769075.08 Government Spending on Education Infrastructure 1103380440 900516587243.13 1037144322340.91 Banyuwangi 1081161227620.00 421.14 573660579218.00 619332709000.00 Bondowoso 580910924392.70 690216276822.03 549567958684.28 498999432536.00 Situbondo 595670105452.60 548033779878.00 1351944972906.58 1233040075238.00 Jember 1330388594485.88 212900880061.00 484911689915.97 694128429513.00 Lumajang 666720445864.00 75204860100.00 656646492057.79 646423051479.80 Probolinggo 680479527072.00 635666442674.00 889892142607.00 928822767800.00 Pasuruan 950826359584.03 865068872012.00 217808614477.53 228390394280.12 Probolinggo City 243130224437.46 211931162684.00 Source: BPS, (2020)

Based on table 2 the development of social Research conducted by Kumari & Sharma, (2017) infrastructure in the Tapal Kuda area tends to increase explains that social infrastructure in the form of health from 2016 to 2019, both in terms of health and and education can have an impact on economic education. Investments made by the government in the development. Investments in health infrastructure will form of increased spending on health and education are reduce income inequality. Thus, local government a form of long-term investment made by the spending on health infrastructure can encourage government. This is because the economic impact economic development. In addition, the good quality of resulting from increased spending on education and human resources due to an increase in local government health cannot be felt immediately and in the near term. spending on education infrastructure has an impact on

Wahyudiyono; Hmlyan Jr Eco Bus Mgn; Vol-2, Iss- 1 (Jan-Feb, 2021): 31-41 reducing educational inequality which will affect workforce skills (Jones, 2019). Therefore, the new economic development (Zolfaghari, Kabiri, & economic growth theory emphasizes knowledge as one Saadatmanesh, 2020). On the other hand, in of the factors in economic growth that can increase determining the development and use of infrastructure productivity in the long run (Schilirò, 2019). The model contained in the Regional Medium Term Development equation of the new economic growth theory is: Plan (RPJMD) in the Besuki Residency area, it is still ( ) (01) not optimal, so further research is needed regarding the relationship between infrastructure development and (Y) in the model equation above is an output / economic growth in the Tapal Kuda area. Therefore, the economic growth, while (A) is a constant. In the theory focus and purpose of this research is how the influence of new economic growth, the technological factor is of infrastructure development on economic growth in considered an exogenous factor which in equation the Tapal Kuda area in the period 2016-2019. model (01) the technology factor is included in the constant (A). Then (K) is capital which consists of ITERATURE EVIEW capital (investment), labor including the quality of the L R workforce such as education level, skills, health level, New Growth Theory and all aspects that can affect labor productivity. In the New Growth Theory was put forward by Paul M theory of new economic growth, the knowledge factor Romer (1986) and Robert Lucas (1988) as a critique of is considered an endogenous factor that can affect the the economic growth theory put forward by Sollow and amount of output in the long run, therefore the Swan. In the new growth theory, Paul M Romer and framework of the new economic growth theory is in the Robert Lucas suggest that economic growth is long run. (Firth & Mellor, 2000) explained that there influenced by the amount of capital used in the are several distinguishing factors between the theory of production process. What is meant by capital in the new economic growth and the theory of economic theory of new economic growth is capital in the form of growth put forward by Sollow and Swan. The enabling money invested by investors but also in the form of factors of the two theories are summarized in Table3. labor used in the production process including various variables that influence it such as education level and

Table 3 Differences between the New Economic Growth Theory and the Sollow and Swan Economic Growth Theory of Sollow and Swan Economic Growth New Economic Growth Technology is considered an endogenous factor Technology is considered an exogenous factor Enforceable Diminishing Return to Scale Applicable to Support Increasing Return to Scale Short-term Economic Growth Long-term Economic Growth factors, Endogenous namely capital and labor, including the quality of labor Source: Firth & Mellor, 2000 (processed)

In the new economic growth theory suggests that Infrastructure led Development Theory The production factors in the form of technological infrastructure led development theory states that developments are production factors which are public infrastructure development is a tool in driving exogenous in which all producers can enjoy the economic development and as the main motor in development of existing technology without market driving economic growth. This theory is based on the competition in its use. Meanwhile, the endogenous assumption that the theory of endogenous economic factors of production are capital and labor, in which the growth does not apply, which means that factors driving knowledge factor possessed by workers is also economic growth such as human capital accumulation endogenous. The new economic growth theory and technological development are not the main factors considers that knowledge of workers, both formal and driving economic growth, but infrastructure, health, and informal knowledge, is an endogenous factor because the amount of savings are the main factors in driving the knowledge possessed by workers can create economic growth. (P. Agénor, 2006; PR Agénor, 2010). innovations both in the work system and in product An important aspect in the Infrastructure led creation, so that this will have an impact on increasing development theory is infrastructure development based work efficiency and output growth. In addition, this on the formation of infrastructure networks, so that the innovation will also have an impact on the expansion of availability of various infrastructures in the region can capital in order to produce new products, so that this complement each other and encourage economic will also have an impact on the expansion of the growth in the region. With the construction of workforce, and will further have an impact on infrastructure based on the infrastructure network, the increasing income, people's purchasing power, and benefits and positive impacts felt by the community will people's welfare. be even greater and more effective. for example, the development of road infrastructure in an area that is not balanced with the development or provision of 35

Wahyudiyono; Hmlyan Jr Eco Bus Mgn; Vol-2, Iss- 1 (Jan-Feb, 2021): 31-41 electricity and sanitation service infrastructure in that infrastructure carried out by the government as in the area, the level of productivity in that area will remain education and health sectors can also increase public hampered due to the absence of a complementary access to education and health services, which in the infrastructure network. With the complementary long run will have an impact on improving the quality infrastructure network, economic efficiency in the of human resources and increasing productivity. On the region will occur (Sawada, 2015). other hand, infrastructure development is one of the strategic policies focused by developing countries to Infrastructure development carried out by the increase their economic growth and development in the government is a form of public service provision long term (PR Agénor, 2010; Fourie, 2006). The results provided by the government to the community. The of empirical studies conducted by (PR Agénor, 2010; infrastructure built by the government is divided into Jwa, 2017) show that the lack of infrastructure two types, namely economic infrastructure and social provision and the low quality of infrastructure in infrastructure (PR Agénor, 2010; Fourie, 2006). developing countries have an impact on the emergence Economic infrastructure is infrastructure built by the of several economic and social problems such as low government with the aim of increasing economic economic efficiency, low social welfare, and lack of growth and encouraging economic development with public access. on education and health. This, either economic efficiency and effectiveness following the directly or indirectly, will have an impact on the level existence of infrastructure. several forms of economic of community productivity and non-optimal economic infrastructure, namely transportation access such as growth. roads, railways, ports, airports and terminals. Apart from access to transportation, there are also several ESEARCH ETHODOLOGY facilities related to the livelihoods of many people, such R M as electricity, telecommunication networks, water This study uses panel data sourced from the Central channels, sanitation and irrigation channels. Meanwhile, Statistics Agency (BPS) and the Regional Financial and social infrastructure is infrastructure built by the Asset Management Agency (BPKAD). The research government with the aim of improving the welfare of period is 2012-2019. The object of this study is the the community. Examples of forms of social Tapal Kuda area of East Java Province, which consists infrastructure are health facilities, education, cultural of Banyuwangi Regency, Situbondo Regency, centers, religious offices and others. Bondowoso Regency, Jember Regency, Probolinggo Regency, Pasuruan Regency, Lumajang Regency and Infrastructure development carried out by the Probolinggo City. The research model specifications in government is a form of public investment which is this thesis are adopted from the research model of expected to increase the efficiency and effectiveness of Kumari and Sharma (2017); Maryaningsih et al., the economy. In addition, the development of social (2014); Prasetyo et al., (2013). .

Where: GRDP : gross regional domestic income based on current prices LIS : number of electricity users ROAD : length ofroad KES : health facilities EDU budget: education budget WATER : clean water users (PDAM customers) are a constant; is a parameter vector; it shows the region at a specific time; ε is the error term; log is a logarithmic transformation.

The analysis in this study uses panel data which is a The last panel data estimation uses the random effect combination of time-series data and cross-section data. which has differences among other methods, namely the In this study using panel data balance. The methods coefficient slope which is not constant and is considered used in estimating panel data are pooled regression, an independent variable. fixed effect and random effect. The pooled regression model is a panel data estimation model that uses the Meanwhile, to obtain a good panel data estimation Ordinary Least Square (OLS) method, or it can be method through the Chow test, the Hausman test and called the method Panel Least Square (PLS). The the test Lagrange Multiplier (LM). Testing using the assumption used in this method is that individuals have Chow test to compare between the fixed effect model intercept or slope a constant. The fixed effect method is and the PLS model. This test is done by comparing the a method that indicates that there are differences both significant results in statistical tests. The results of this individually and in the time period in the estimation. test if the statistical F calculation is greater than F table This is because each individual is considered to have then H0 is rejected, which means using a model fixed their own characteristics which I usually use a dummy. effect and vice versa. The second test is through the

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Hausman test which is used to select the model use the PLS model the independent variables that have a between the fixed effect model and the model random significant effect on GRDP are LIS (electricity users) effect. This is done by comparing the Hausman with a positive coefficient and α <10%; ROAD (road statistical value with the chi-square table value. The last length) with positive coefficient and α <1%; and KES test is the LM test which is used to see the use of the (health access) with a positive coefficient and α <1%. In random effect model or the PLS model. This test is the FEM model, the GRDP is significantly influenced performed by comparing the LM statistical value and by the ROAD variable with a positive coefficient and α the critical value chi-square. <1%; KES variable with positive coefficient and α <1%; and EDU variable with negative coefficient and α ESULTS AND ISCUSSION <1%. The result of panel data regression analysis for R D REM model shows that the GRDP is significantly Analysis affected by the ROAD variable with a positive Results Panel data analysis in this study includes coefficient and α <1%; KES variable with positive regression analysis using Method the Least Square coefficient and α <1%; and EDU variable with negative Panel (PLS), Fixed Effect Model (FEM) and Random coefficient and α <1%. Effect Model (REM). Based on Table 4.1 shows that in

Table 4. Panel Data Regression Analysis Variable PLS FEM REM Coefficient Probability Coefficient Probability coefficient Probability constant 0.2570 -8.475907 0.0236 -0.311898 -1.965487 0.8324 logLIS 0.0901 0.043598 0.2146 0.042867 0.163598 0.2199 logROAD 2.1704720.971389 0.0000 0.0001 0.607842 0.0000 logKES 0.3323870.386137 0.0045 0.0000 0.431614 0.0000 logEDU -0.035224 0.7776 -0.161945 0.0001 -0.169960 0.0000 logAIR 0.094849 0.4805 0.072972 0.1648 0.055699 0.2797 * α = 1%, ** α = 5%, *** α = 10%

Based on the table of t-statistical test results the Random Effect Model (REM) can written the linear regression equation as follows: ( ) .

The results of the analysis can be explained as with Tapal Kuda GDP, the t-statistical probability follows: value of the KES variable is 0,000 which is smaller 1) The LIS variable has a positive coefficient value than the alpha value = 1% which means that the which means that LIS and GRDP have a KES variable has a significant relationship with unidirectional relationship. Based on the t- GRDP, thus, if there is an increase in financial statistical probability value, the LIS variable does realization for the health sector, it can significantly not have a significant relationship with GRDP, the encourage economic growth in the Tapal Kuda area statement is proven by a probability value of of East Java, the 0.2199 which is more greater than alpha (α = 10%), 4) coefficient value of the EDU variable shows a thus if there is an increase in the number of negative value which means that the EDU and electricity customers, it can increase the GRDP, but GRDP variables have an opposite relationship. the this effect is not significant. probability value of the t-statistic shows that 0,000 2) The coefficient value on the ROAD variable which means that the financial realization for means that ROAD has a direct relationship with education has a significant effect on the GRDP of GRDP growth, based on the t-statistical probability the Tapal Kuda region of East Java, this statement value. ROAD variable shows that between ROAD is evidenced by a probability value less than alpha and GRDP has a significant relationship as = 1%, thus if there is a decrease in budget evidenced by the probability value of 0.000, which realization, For the education sector, the PDRB of is smaller than the alpha value = 1%, thus if there is the Tapal Kuda area tends to increase and this infrastructure development in the form of road effect is significant, the expansion or road repair, it can encourage the 5) AIR variable has a positive coefficient value which growth of PDRB in the Tapal Kuda area of East means that the increase in access to clean water Java significantly, the proxied by the number of PDAM users has a 3) KES variable has a positive coefficient value which unidirectional relationship with GRDP, The t- means that the financial realization value of the statistic value of the AIR variable is 0.2897, which financial sector has a unidirectional relationship indicates that the AIR variable does not have a

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significant effect on the PDRB of the Tapal Kuda (FEM) is the best model than the Pooled Least Square area of East Java because the probability value is (PLS). The Hausman test results show a probability more than alpha = 10%, thus, if there is an increase value of 0.0669 which is greater than the value alpha (α in the number of PDAM customers or access to = 0.05), thus giving the meaning that the REM model is clean water, it can increase the GRDP, but this the best model than the Fixed Effect Model (FEM). effect not significantly. Furthermore, the results of the Lagrange Multiplier analysis show a probability value of 0.000, which is The next step after that is the test for selecting the smaller than the value alpha (α = 0.05) which indicates best model with the Chow test, the Hausman test and that the Random Effect Model (REM) is the best model the Lagrange multiplier test. The chow test results show than the PLS model. Thus it can be concluded from the the probability value of 0.000, which is smaller than the model selection test that the Random Effect Model alpha value (α = 0.05), so the Fixed Effect Model (REM) is the best model for estimating in this study.

Table 5. Panel Data Model Selection Test Results Method Probability Best Model Results

Chow Test 0,000 Fixed Effect Model (FEM)

Hausman Test 0.0669 Random Effect Model (REM)

Test Lagrange Multiplier 0,000 Random Effect Model (REM)

ISCUSSION growth in the horseshoe region which also shows a D unidirectional relationship. This indicates that the Based on the results of the analysis, it shows that the development of road infrastructure which is increasing LIS variable which is a variable of the number of tends to give a boost to economic growth in the electricity customers as a proxy for physical horseshoe region, and vice versa if the condition of road infrastructure has a positive relationship, namely a infrastructure tends to decline it can hamper economic unidirectional relationship, but its nature is not growth. The results of this study are in line with significant. Physical infrastructure has an important role previous empirical studies from Maryaningsih et al., in driving economic growth, thus the electricity variable (2014), Badalyan, et al., (2014), Zahra et al., (2016), has a positive relationship to economic growth. Kumari Ng (2019), Wang et al., (2020) which in general proves and Sharma (2017) Maryaningsih et al., (2014) Zahra et that road infrastructure has a significant positive effect al., (2016). One of the factors that causes the increase in on the economic growth of a region / country. electricity customers is not significant in driving the economy of the horseshoe region, namely the addition The positive spillover effect of transportation of more electricity customers for the household sector infrastructure on economic growth in the horseshoe area than for industry. In addition, the electrification ratio shows that the transportation network that is which measures the availability of electricity supply in interconnected between regions is beneficial for East Java reaches 91.58%, but it is not evenly economic activity. In addition, the geographical distributed, especially for the Madura archipelago and proximity and the similarity of economic, cultural and Sitobondo and Bondowoso districts (Bappeda East Java institutional distances between the horseshoe regions of Province, 2018). East Java have resulted in mutually beneficial economic growth. (Wang et al., 2020). Provision of road Based on the report from Bappeda East Java has an infrastructure not only decreases physical barriers by electricity reserve of 1,787 MW. It is hoped that this stimulating the movement of people, goods and sufficient electricity reserve can support the stability of services, but also improves access to markets, social electricity supply in East Java and become an incentive services and employment by reducing overall for investors to contribute to the development of transportation time and costs (Ivanova & Masarova, industrial estates in East Java. Furthermore, related to 2013; Ng et al., 2019; Wang et al., 2020). The the electricity transmission network, which is a network construction or provision of high-mobility road that flows power plants to users, it is expected to infrastructure such as toll roads can increase speed and encourage regional economic development. This is increase the efficiency of domestic and international related to ensuring adequate electricity supply for the trade by reducing transportation time and costs; while industrial sector so that it can be an incentive for the construction or provision of road infrastructure with investors who are interested in establishing industrial high accessibility such as local roads allow easy land activities in East Java and creating new jobs (Bappeda access and promotes commercial and social activities at East Java Province, 2018). Based on the estimation the local level (Kumari & Sharma, 2017; Wang et al., results show that the physical infrastructure in the form 2020). of long roads has significant influence on economic 38

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Based on the analysis results show that social Education offers the opportunity for people to infrastructure is proxied by the realization of expand their knowledge and hone their skills. In other expenditures in the health sector shows a significant words, education serves to stimulate productivity and positive influence. The results of the analysis indicate accelerate economic development (Dumciuviene, 2015; that an increase in funds spent on health supports Saviotti et al., 2016; Šipilova, 2015). Education is one economic growth in the horseshoe region of East Java, of the most important factors for innovation and and vice versa if there is a decrease in the realization of economic growth as well as for business and society. the health budget it can slow down economic growth. Governments intervene in the education market in many The results of this study support the previous empirical countries and provide public funds for their education study of Prasetyo et al., (2014) Kumari and Sharma systems (Hanushek & L Wo¨ßmann, 2010; Saviotti et (2017) (Aboubacar & Xu, 2017) (Brini & Jemmali, nd) al., 2016). The involvement of public entities or which in general proves that spending on health has a government transfers from one party to another can significant positive effect on economic growth. pose a risk of misallocation of resources (Duerrenberger Adequate and efficient health-related spending is & Warning, 2018; Uberti, 2018). widely considered to be inevitable in improving health status (Irmen & Kuehnel, 2009; Mori & Christodoulou, Based on the results of data analysis, it shows that 2012; Oberdabernig, 2013). At the macro level, the clean water variable has a positive and insignificant investment in health personnel and infrastructure is effect. The results of this study support previous expected to improve health conditions, resulting in research. from Prasetyo (2008) who concluded that better human resources and higher productivity electricity, road length, capital stock, and local (output). This positive and significant result is due to authorities have a positive effect on the economic the fact that basically the welfare of the community can development of the Western Indonesian Region, while be fulfilled where the local government is able to meet the clean water variable is not significant community needs such as education and health. To (Maryaningsih et al., 2014). Access to clean water is an meet the needs of the community and to carry out important factor needed by the community to carry out regional development, regional governments need to their daily life, besides that for the industry, it is a manage their regional finances properly, so that they significant factor in maintaining the quality of products can finance the implementation of development in their from these industrial processes. The need for clean regions effectively and efficiently. Each region has water in each period has increased along with the different needs and characteristics so that the allocation increase in population and economic activity. The of the APBD is expected to be adjusted to the needs of current phenomenon is that the need for clean water is each region (Korompot & Warongan, 2017; Retno & increasing sharply and there are gaps in the ability to Yuwanto, 2018). Thus, the success of human supply water between urban and rural areas (Maqin, development in an area cannot be separated from the 2016; Maryaningsih et al., 2014; Warsilan & Noor, amount of budg et al.,located for the needs of that area. 2019). Inequality in water availability is also caused by (Qisthina et al., 2019) seasonal factors, both the dry season which causes drought and the rainy season with high enough rainfall The results of the analysis of research data show that which causes floods where the availability of clean education expenditure, which is a proxy for social water is minimal. Therefore, an appropriate scheme is infrastructure, has a significant negative effect on needed to deal with the problem of drought, one of economic growth in the horseshoe area of East Java. which is to improve the service of drinking water These results indicate that the greater number of distribution networks in urban areas through a cross- expenditure realists for education tends to reduce regency / city (regional) system as well as the economic growth in the horseshoe region of East Java, development of rural drinking water through the use of and vice versa. The results of this study support protected water sources (Bappeda, East Java Province, previous empirical studies by Nurudeen and Usman 2018). In addition, improvements in infrastructure (2010) and Wongbousin and Phiromswad (2017) which conditions both hard and soft need to be pursued while proved that in their analysis expenditure on education taking into account geographical aspects and regional had a significant negative effect. This phenomenon needs (Maryaningsih et al., 2014) illustrates that the amount of budget realization for education has not fully shown a positive effect on ONCLUSION economic growth. This can be caused by improper C budget realization and poor financial management for Based on the results of panel data analysis, it also several educational institutions (Nurudeen and Usman shows that road length, health expenditures, and the use (2010); Wongbousin and Phiromswad, 2017). of water sanitation have a significant positive effect on Therefore, no matter how much funds are spent on economic growth in the horseshoe area. Meanwhile, the education, which has the initial goal of increasing use of electricity does not show a significant effect on human capital and economic growth, it can be useless economic growth in the horseshoe area. In addition, because of poor financial performance, which tends to spending on education shows a negative but significant hamper economic growth. effect in affecting economic growth in the horseshoe area. In infrastructure development in horseshoes, it can 39

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