THE IMPACT OF THE SIDOARJO HOT MUD VOLCANO DISASTER ON EAST JAVA ECONOMIC GROWTH AND INCOME DISPARITY

• Main Authors: , Dwi Hari Prayitno, , Prof. Chen Kuang-hui.
• Format: Theses and Dissertations NonPeerReviewed
• Published: [Yogyakarta] : Universitas Gadjah Mada 2013
• Subjects: ETD
• Online Access: https://repository.ugm.ac.id/126039/; http://etd.ugm.ac.id/index.php?mod=penelitian_detail&sub=PenelitianDetail&act=view&typ=html&buku_id=66229
• Institution: Universitas Gadjah Mada

The Sidoarjo hot mud volcano is a new volcano triggered by technical error during oil exploration. The mud started to flow on May 29, 2006 and still continuing till today. This disaster hit the main core of industrial area in Sidoarjo regency, the second largest industrial area in Indonesia after Jakarta. The disaster disrupted main transportation, gas piping, railway, and electricity in eastern part of East Java. This study investigate the impact of the Sidoarjo hot mud volcano disaster on East Java economic growth and income distribution. To capture the impact of the disaster on economic growth, this research utilizes a regency and city panel data set in East Java for period 2001-2011. The GMM (generalized methods of moment) estimates suggest that the disaster does have negative impact on East Java economic growth but almost disappeared in three years. In terms of economic corridor, the impact spread unevenly among them. Corridor 2 and Corridor 3 has a negative impact in 2006, with the former�s lager than latter. In 2007, only Corridor 2 has a significant impact and the sign change into positive. To capture income inequality this research uses kernel density estimation and Theil index. Theil index has increasing trend from 2001 to 2011 with a fluctuation in 2009. The main sources of the inequality are between corridor inequality and within inequality of Corridor 1, with the latter shows increasing trend. Widening of inequality is also supported by the kernel density estimate of income per capita by regions. It shows income gap becoming clearer between �prosperous� regions (majority belong to Corridor 1) and other regions, and within prosperous regions.