Determinants of Real Expenditure Per Capita with Spatial Modeling in Indonesia by Province 2024

Abstract

Household consumption is a driving force behind the economic growth. This study aims to identify the determinants of real expenditure per capita in Indonesia by province in 2024. The data used in this study are sourced from the Statistics Indonesia (BPS), which include real expenditure per capita as dependent variable, gross regional domestic product (GRDP) per capita, unemployment rate, mean years of schooling (MYS), government expenditure, inflation, and poverty rate as independent variables. These variables were modelled using a spatial model due to spatial autocorrelation. The selection of the spatial model, between Spatial Autoregressive (SAR) model and Spatial Error Model (SEM), was carried out using the Lagrange Multiplier test. The results indicate that the SEM is suitable for analysing real expenditure per capita spatially. The estimation results show that the variables of GRDP per capita and MYS have a significant and positive effect on real expenditure per capita, whilst the variables of unemployment rate, government expenditure, and the poverty rate have a significant negative effect. The inflation variable has no significant influence on real expenditure per capita. The spatial autocorrelation component in the model’s residuals has a significant influence within the model.