The Effects of Air Quality on Economic Activity in Indonesia

Abstract

Air pollution may contribute to climate change in Indonesia, and it has the potential to undermine national economy over the long term due to the high expenses of dealing with environmental damage. The study's goal was to investigate and assess the impact of the industrial sector's GDRB, the mining sector's GDRB, the agricultural sector's GRDB, the level of education, the level of poverty, the quantity of trash generated, and the rate of deforestation on air quality in Indonesia. Secondary data types include time series and cross section (panel data) covering 34 provinces in Indonesia from 2016 to 2019. Descriptive statistical research approach using a step-by-step panel data regression model (fixed or random effect) with Chow test, Hausman test, and Lagrange multiplier method. Then, partly and concurrently, the classical assumption test and the statistical test (t-test and F-test). This research found that GRDB growth in the industrial sector has a positive significantly effect on air quality, GRDB growth in the mining sector has a negative significantly effect on air quality, GRDB growth in the agricultural sector has a negative significantly effect on air quality, and education level has a positive effect. Poverty level has no effect on air quality, waste generation has no effect positive on air quality, and deforestation rate has a negative significantly effect on air quality in Indonesia.