Page 260 - Contributed Paper Session (CPS) - Volume 2

CPS1853 M. Irsyad Ilham

Panel data regression modelling of economic
impact on environmental quality: The case of
Indonesia
M. Irsyad Ilham
Badan Pusat Statistik Republik Indonesia
Abstract
This study examines the impact of economic development, population density,
and number of vehicles on environmental degradation from 31 provinces in
Indonesia for the period 2011-2014. Panel data analysis, which widely used to
examine issues that could not be studied in either cross-section or time-series
settings alone, is used herein. Our empirical results support the hypothesis on
the direction of causality those three factors of environmental damage in the
country. The smallest cross-section random effect is holds for Banten and Riau
provinces which indicates the lowest environmental quality when all factors
are fixed. Our empirical findings provide important analysis for the country
being studied.

Keywords
Environmental Quality Index; Economic Development; Population Density;
Number of Vehicles; Panel Data Analysis

1. Introduction
Recent day, one of the most important issue for developing countries is
environmental degradation (Kojima, 2007; Todaro and Smith, 2013; Warren
and McCarthy, 2012). The issue of environmental degradation is still much
needed important research agenda because of its global significance
(Rahman, 2017). The United Nations argues that environmental problems had
to be overcome by implementing sustainable development program for all
countries (United Nations General Assembly, 2015).The economic impact on
environment tend to be less pay attention may result in negative externalities
of environmental damages (Pearson, 2000). Those impacts finally could effect
by reducing economic output by sectors (Hussen, 2004). According to
Indonesia’s Ministry of Environment and Forest, during 2011-2014, the
average environmental quality index poses in low-level and has decreased by
3,56% in four years. The data also shows the trend of deterioration in water
and forest coverage albeit air quality tends to be stagnant in good-level. This
capture concludes that environmental still become urge due to the impact
arises such as endanger ecosystem balance and even human health risk.
There are several factors that affect environmental degradation in a
county. Economic development is also known as a factor that declines
environmental quality. Besides the meaning of that term which an activity to
improve the performance of every sector of the economy, however, the

249 | I S I W S C 2 0 1 9