| Summary: | Some studies on growth convergence have given mixed results about the rate of
convergence. This study reassesses regional growth convergence in Indonesia by
implementing dynamic panel data estimation on provincial data over the period
1989�2009. Using neoclassical growth model as suggested by Solow and System
GMM estimator, this study finds that there are absolute and conditional
convergences among provinces in Indonesia over the period 1989�2009. The
estimated rates of conditional growth convergence from the basic and the
augmented Solow models are 2.4% per year and 2.2% per year, respectively. The
results also show that investments in both physical capital and human capital are
positively correlated with economic growth, while the correlation between
population growth rate and economic growth is found to be not significant. This
study also finds no significant differences in convergence rates between western
and eastern regions of Indonesia, as well as before and during the decentralization
era.
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