A Nexus between Governance, Infrastructure and Economic Growth in Indonesia

Abstract

Good governance has an important role to promote economy growth. The study relationship between governance with economic growth using aggregate data in Indonesia did not find a significant relationship. Therefore, the purpose of this study was to explore the influence of governance on economic growth, both direct effects and indirect effects through infrastructure provision. By employing two stages least square method on the data 245 districts/cities in 2010, the results of this study indicate that governance affects economic growth through the provision of road infrastructure and the electricity infrastructure. A discussion of public policy and the firmness of the regional head on anti-corruption measures improving road infrastructure, while the duration of roadworks negatively affect the provision of road infrastructure. Facilitation efforts by the local government will increase the supply of electricity infrastructure. Governance affects economic growth directly through government policy that does not increase costs for businesses.