Growth Externalities on the Environmental Quality Index of East Java Indonesia, Spatial Econometrics Model of STIRPAT

Abstract

East Java has shown strong economic growth, which negatively affects its environmental quality. Analysis of the functional relationship between economic growth and environmental quality is important to direct the growth without further deteriorate the environmental quality in this area. It is assumed that growth produces some externalities on environmental quality. The spread of technological information, economic productivity, population growth or investment, can be the source of the growth externalities. The objective of this study is to test the significance of the involved growth externalities on East Java’s environmental quality. Using spatial data, the externalities are accommodated in a spatial version of the STIRPAT model. It is estimated using per city/regency 2015 data. The analysis indicates that local density, local agricultural productivity, neighboring density, and neighboring mining activity significantly affect the local environmental quality. The latter two are the main sources of the growth externalities.