Advances in Economics, Business and Management Research, volume 163 Proceedings of the International Conference on Strategic Issues of Economics, Business and, Education (ICoSIEBE 2020) Analysis of Regional Disparity Among Regencies/Cities and the Correlation with Economic Growth North Sumatera in 2010-2019 Armein Daulay1,*, Muhammad Yusuf1, Indra Maipita1 1Ilmu Ekonomi Universitas Negeri Medan *Corresponding author. Email: [email protected] ABSTRACT This research is aimed to find out the level of regional disparity, the effects of government expenditure, natural resources, and the investment toward regional disparity among regencies/cities in North Sumatera Province, and the relationship between the inequality and economic growth of North Sumatera Province in 2010-2019. Using secondary data, the research applies Williamson index analysis technique to measure the development disparity. The panel regression analysis; Common Effect, Fixed Effect and Random Effect; is used to analyze the effects of government expenditure, investment, and natural resources toward regional disparity in North Sumatera in 2010-2019. This research also uses Product Moment Correlation and Regression Curve Estimation to find out the correlation between the disparity and economic growth. The result of the study shows that the level of regional disparity in North Sumatera Province is very high. Government expenditure, natural resources significantly affect the regional disparity, whereas the investment does not significantly affect the disparity. The correlation between the growth economy and regional disparity indicates a very weak negative correlation. Thus, the data cannot be used to explain the correlation between economy growth and development disparity in North Sumatera Province in 2010-2019. Keywords: Economy Growth, Regional Disparity 1. INTRODUCTION This indicates that economic growth is a necessary condition for regional development but it is not a Disparity in economic development between regions sufficient condition. Because there are other factors that is a common phenomenon that occurs in the economic are very important, that is how the development will development process of a region. The occurrence of make local communities more prosperous by increasing development disparity between these regions has community income. implications for the welfare of the community in the region concerned. Usually, the implications are in the For this reason, it is very important to carry out form of jealousy and public dissatisfaction which can development in a planned and well directed way towards also continue with political implications and the peace of reducing regional disparity. Understanding thoroughly society [19]. the problem of disparity needs to be a reference in the formulation of development planning, so that efforts to Regional disparity is a logical consequence of the achieve equitable development in Indonesia can be development process and it will change in line with the achieved. changing levels of the development process itself. The patterns of development and the level of disparity in Regions with higher economic growth than other development in several countries are not the same, this is regions will face a new burden that is the poor areas in due to several different factors found in the countries, their vicinity will move to these areas. This occurs due to such as the ownership of resources, facilities, the attraction of more job opportunities in these urban infrastructure, history of the countries, location and so on areas. The problem that arises as a result of this is that [20]. population density can increase the unemployment rate because the available jobs are unable to employ the entire Economic growth has a significant negative effect on population [20]. regional disparity. It means that if economic growth increases, regional disparity decreases and vice versa. Copyright © 2021 The Authors. Published by Atlantis Press B.V. This is an open access article distributed under the CC BY-NC 4.0 license -http://creativecommons.org/licenses/by-nc/4.0/. 45 Advances in Economics, Business and Management Research, volume 163 8.00 Table 1 Regional GDP Per capita per District/City of the 7.00 (%) Province of North Sumatera in 2010 dan 2019 6.00 5.00 4.00 District/City 2010 2019 3.00 District Nias 3.887.995,00 17.883.380,85 20 20 20 20 20 20 20 20 20 20 District Mandailing Natal 5.017.866,00 20.962.971,93 District Tapanuli Selatan 5.761.855,00 34.347.618,14 Percebtage 10 11 12 13 14 15 16 17 18 19 District Tapanuli Tengah 3.850.869,00 18.648.164,53 Sumatera District Tapanuli Utara 5.780.955,00 19.102.542,90 6.4 6.6 6.4 6.0 5.2 5.1 5.1 5.1 5.1 5.2 Utara District Toba Samosir 10.176.988,00 29.966.805,00 District Labuhanbatu 7.857.113,00 47.012.833,83 Indonesia 6.2 6.2 6.0 5.6 5.0 4.8 5.0 5.1 5.2 5.0 District Asahan 8.065.320,00 35.962.477,21 District Simalungun 6.812.974,00 31.510.549,87 Source : Central Bureau of Statistics (BPS) District Dairi 7.593.589,00 23.108.408,98 (various years of publication) District Karo 9.594.214,00 34.568.495,81 District Deli Serdang 8.107.952,00 32.735.982,06 District Langkat 7.452.508,00 28.410.906,73 Figure 1. Economic Growth of North Sumatra Province District Nias Selatan 4.251.105,00 13.194.782,00 and Provincial Average in Indonesia, 2010-2019 District Humbang Hasundutan 5.864.032,00 21.773.933,27 District Pakpak Barat 4.070.571,00 17.416.968,84 District Samosir 8.846.290,00 24.556.541,89 From the statistical data above, North Sumatra's District Serdang Bedagai 7.663.966,00 31.462.548,99 economic growth since 2011 tended to decreased until District Batubara 19.672.216,00 57.620.639,63 District Padang Lawas Utara 3.479.380,00 30.172.574,96 2015 and slightly increased in 2016. The economic District Padang Lawas 3.356.540,00 28.300.859,48 growth of North Sumatra Province in 2010-2019 was District Labuhanbatu Selatan 10.212.617,00 55.313.131,96 relatively higher when compared to Indonesia's economic District Labuhanbatu Utara 9.565.185,00 47.439.334,26 District Nias Utara 3.851.851,00 16.905.750,27 growth. District Nias Barat 3.106.083,00 15.053.784,59 City Sibolga 8.759.806,00 40.745.042,24 In the 2015-2019 National Medium-Term City Tanjungbalai 9.043.279,00 33.045.712,63 Development Plan (RPJMN), Book II on the Field City Pematangsiantar 8.687.762,00 37.646.293,76 Development Agenda, states that economic growth will City Tebing Tinggi 8.024.751,00 24.050.958,21 City Medan 17.077.622,00 68.766.609,71 increase sharply since 2016 which boosts economic City Binjai 8.209.884,00 29.405.725,65 growth in 2017 to reach 7.1 percent and continues to City Padangsidempuan 4.887.204,00 19.210.085,98 increase in 2018 and 2019 which are targeted to reach 7.5 City Gunungsitoli 6.877.659,00 24.071.792,96 SUMATERA UTARA 9.110.777,00 37.048.911,92 percent and 8.0 percent, respectively. But in reality, in Source: Central Bureau of Statistics (BPS) 2017 Indonesia's economic growth rate was only in the (various years of publication) range of 5.1 percent and North Sumatra's economic growth was in the range of 5.12 and the target of 2015- Medan City has the largest per capita GRDP in North 2019 RPJMN economic growth in 2018 was only 5 Sumatra Province of Rp. 68.766.609,71 in 2019 then percent. followed by Batubara District in the amount of Rp. [19] argues that the income distribution analysis looks 57..620.639.63, while the GRDP per capita of North at the disparity between groups of people, while the Sumatra Province is Rp. 37.048,911,92. Batubara inequality of development between regions looks at District has contributed to the increase in GRDP from PT. differences in the level of development between regions. Inalum originates from the distribution of net income to What is at issue here is not the difference between the local revenue or sharing of tax revenues. The figure also rich and the poor, but between developed and shows that the GRDP per capita figures of regencies and underdeveloped regions. cities are still much below the GRDP per capita figure of North Sumatra Province. The existence of this per capita In a study by [19], who first conducted a study on the GRDP variation indicates the occurrence of income size of development disparities between regions, the term inequality between regencies/cities in North Sumatra Williamson Index emerged as a tool to measure Province. development disparities between regions. The Williamson Index is used to see development disparities According to [19], economic inequality between between regions by using the Gross Domestic Product regions is a common aspect of economic activity in a (GRDP) per capita as the basic data. region. This imbalance is basically caused by differences in the content of natural resources and differences in GRDP per capita of regencies/cities in North Sumatra demographic conditions in each region. Province in the picture above shows an increasing trend from 2010 to 2019. PDRB per capita of Labuhan Batu Policy on the distribution of government spending District, Batubara District, Labuhan Batu Selatan that is right on target and the right direction of investment District, North Labuhan Batu District, Sibolga City and to areas that can create job opportunities will increase Medan City exceeds the per capita GRDP of Sumatra economic growth, but if the distribution cannot be carried Province.