Direct and indirect effects of investment on community welfare

  • Received November 5, 2018;
    Accepted September 12, 2019;
    Published September 23, 2019
  • Author(s)
  • DOI
  • Article Info
    Volume 16 2019, Issue #3, pp. 206-216
  • Funding data
    Funder name: STIE YKPN Yoguakarta, Indonesia
    Funder identifier:
    Award numbers:

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

Despite the fact that the government is the main actor of economic development, it also invites private parties to be actively involved in the economic development. The main objective of public and private investment is economic development. But the ultimate goal of investment and economic development itself is to improve the welfare of the community. This study seeks to investigate the effect of private and public investment on economic growth. Furthermore, it also investigates the impact the investment on the community welfare either directly or indirectly through economic growth by way of analyzing the data on private and public investment, economic growth, and the human development index of local governments in Indonesia for the period from 2012 to 2016. Hypotheses were tested using PLS (Partial Least Squares). The results show that both private and public investment directly influence economic growth and indirectly affect the welfare of the people through economic growth. Direct test results also show the positive effect of economic growth on community welfare.

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    • Figure 1. Research model
    • Table 1. Descriptive statistics
    • Table 2. Results of hypotheses testing