Economic Growth Model in The Fourth Industrial Revolution: Case Study From East Java Province of Indonesia

Abstract

Solow's economic growth theory explains the relationship of capital, labor, and technology to the economic growth of a country. According to this theory, all of the factors have positive impacts on the economic growth. However, in the fourth industrial revolution, technology not only boosts business and economy, but also creates disruption in the economic, business, national and global relations, societal, and individual aspects. Thus, this research aimed to examine whether the traditional economic growth model still has relevance in the fourth industrial revolution. This case study was conducted in East Java Province of Indonesia on account that this province was considered to be representative of Indonesia. The data consisted of those on gross regional product, labor, investment, number of Internet users for purchase/sale of goods and services, as well as number of Internet users for accessing financial facility. The data were panel data from the Statistics Indonesia for the 2015–2017 period. The analysis method used was panel regression to examine the relationship between gross regional product as a response variable and labor, investment, number of Internet users for purchase/sale of goods and service, and number of Internet users for accessing financial facility as predictor variables. By the fixed effect model, it could be concluded: first, there was a positive and significant relationship of investment to the economic growth of East Java; second, there was a negative but not significant relationship between labor and the economic growth of East Java; third, number of internet users for purchase/sale of goods and services had a positive and significant effect on East Java's economic growth; and fourth, number of Internet users for accessing financial facility had negative and significant effect on East Java's economic growth.