Analysis of Economic Growth and Distribution of Revenues in Districts/Cities in Southeast Sulawesi Province

Abstract

This study aims to determine the effect of economic growth, infrastructure, investment, fiscal and labor on income distribution in the regencies/cities in Southeast Sulawesi province. This research uses both descriptive qualitative and quantitative analysis. The former is used to describe phenomena related to the problems studied, and the latter to analyze quantitative information, namely the regression model estimation using data panel. To analyze collected data, the study uses an econometric model, which is defined as a quantitative analysis of actual economic phenomena based on concurrent development of theory and observation, connected with an appropriate method of inference. Econometrics is a mixture of economics theory, mathematical economics, economic statistics, and mathematical statistics. The study investigates economic growth and revenue distribution in 12 regencies/cities in Southeast Sulawesi Province, which included 10 (ten) districts namely Buton, Muna, Konawe, South Konawe Selatan, North Konawe, Bombana, Wakatobi, North Buton, and North Kolaka, and 2 (two) cities including Kendari City and BauBau City, for a period of 6 (six) months. Variables under investigation include two dependent variables, i.e., economic growth (Y1) and income distribution inequality (Y2), and four independent variables namely Infrastructure (IF), Investment (K), Fiscal (F), and Manpower (L). To analyze data, the Fixed Effect panel data regression model is used. Results of the research show that road infrastructure construction, investment, fiscal decentralization and labor has a negatively significant impact on unequal distribution of income, in that road infrastructure, investment, fiscal and labor decentralization can reduce inequality of income distribution. In contrast, the impact of economic growth on the inequality of income distribution is positively significant in that economic growth can increase the inequality of income distribution. These findings do not correspond with Neo Classic theory and Kuznet's Theory which postulate that while inequality of income distribution tends to widen in the early stages of development, it decreases as the development process goes. However, they support Neo Marxist theory which states that economic growth will always widen the gap or inequality between the rich and the poor due to the accumulation of capital and technological progress which tends to increase the concentration of control of resources and capital by the capital rulers of the "elite" society, leaving non-capital owners to remain in poverty. The regencies/cities in Southeast Sulawesi province have their own work agenda that is not connected to each other. This is especially the case with cities which become growth center such as Kendari, BauBau, and Kolaka regencies that are proved to have less impact on other underdeveloped regions. These particular findings confirm Myrdal's theory which argues that backwash effects are more dominant than spread effects, as well as Hirschman's theory which points out that polarization effect is more dominant than trickling down effect. We believe this is because natural resources potentials owned by the cities/regencies in Southeast Sulawesi Province have not been fully utilized and are only partially exploited without integrating them with the resources of other regions.