PUI2017 Extra Credit Project Proposal
Nina Nurrahmawati, github.com/ninanrh, N10678470

Problem Description

 

The government often uses economy growth as a measure of development achievement. Higher economic growth is the better. All progress of development will lead toward the better economy outcome, besides the community welfare. Examining factors that have contributions to the greater economy impact will help the government to prioritize their programs and strategies for maximizing economy growth. Indonesia as one of the emerging markets \cite{town}  will be used as the case study. Indonesia has a decentralized system that gives authority to the local government to run their municipalities. Therefore, the local government is responsible for the development of their regions. This study aims to find factors that determine local economic growth in Indonesia.

Data

This study will use dataset from World Bank  Indodapoer (Indonesia Database for Policy and Economic Research). The dataset contains data of each city in Indonesia (546 cities) and various social, demographic, infrastructure, and economy data. The data will be cleaned by removing several cities that experienced regional expansion during certain timespan. 

Analysis

The idea of this study is based on paper from Susan Cutter regarding social vulnerability to environmental hazard, where she used factor analytic approach to determine contributing factors from hundreds of variable. The analysis of this paper will cover:
  1. Z test of proportion to measure whether there is a significant change on local economy over years, which will be proxied by local GDP.
  2. Factor Analysis using Principle Component Analysis to produce contributing factors that later will be used for regression analysis.
  3. Linear regression to check the performance and significance level of the model. 

References

There is previous empirical study that also discussed about factors affecting economy growth in developing country by Parash Upretti \cite{countries} . His paper concludes that  higher exports volume, plenty natural resources, longer life expectancy, and higher investment rates have positive impacts toward economy growth.