Non linear impact of information Technology on Gross Regional Domestic Product : A Generalized Additive Model Approach

Abstract

Decades of developments in information and communication technology (ICT) have, for better and worse, disrupted economies globally. The GDP of a country is the most important indicator in the analysis of economic growth because through changes in this indicator, the success of macroeconomic development can be seen. Using Indonesian data spanning 2014–2019, this study documents the influence of information technology (IT), local government expenditures, the labor force’s size, and human capital on gross regional domestic product in East Java, one of provinces in Indonesia. We proxy IT in a generalized additive model using the number of cellular phone users. We utilized Ramsey test each predictor variable for linearity with the response variable; all have a nonlinear relation. The model shows that all variables except IT are significant with a coefficient of determination of 93.6%. Human capital, local government expenditures, and the labor force’s size exhibit the largest effect on gross regional domestic product.