Himalayan Economics and Business Management 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 31 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. 32 Wahyudiyono; Hmlyan Jr Eco Bus Mgn; Vol-2, Iss- 1 (Jan-Feb, 2021): 31-41 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