A spatial econometric approach: tourism spillover effect in Indonesia

This study examines the effect of government policies on optimizing the tourism sector to boost the economy and overcome the unemployment problem in 33 provinces in Indonesia. Data exploration in this study uses the econometric spatial approach with an observation period in 2010-2017. Government spending in the tourism sector is a proxy for government support. Meanwhile, working capital loans reflect the response of the private sector to the potential of the tourism sector. The estimation results show a dispersed pattern on the tourism output, while the workforce experiences the phenomenon of agglomeration. The Spatial Durbin Model exposes that government spending in the tourism sector does not have a significant effect on increasing output and employment. Meanwhile, the realization of working capital loans only has a significant effect on employment in the tourism sector. The number of foreign tourists does not have a significant spatial effect on tourism performance. The result is suggesting that top-down tourism optimization policies in Indonesia need to be re-evaluated.