Dynamics of inclusive growth in Indonesia: Key factors in emerging and lagging regions of Java

Inclusive economic growth is characterized by an increase in real per capita income, poverty reduction, diversification of business sectors, and decreasing inequality. This growth must include all segments of society without discrimination, ensuring equal economic opportunities, especially for the poor. This study analyzes the dynamics of inclusive growth in regencies and cities across Java Island, covering 37 developing regions (Quadrant III) and 96 underdeveloped regions (Quadrant IV) based on Klassen’s Typology. The data used comprise time series (2019–2023) and cross-sectional data, analyzed using panel data regression with a fixed-effects model. The findings indicate that economic growth, human capital, financial inclusion, employment opportunities, and road infrastructure positively influence inclusive growth in both quadrants. The poverty rate has a positive impact on Quadrant IV, whereas inequality has a negative impact on both quadrants. Sanitation infrastructure does not have a significant effect in either region. Strategies for Quadrant III focus on infrastructure acceleration, MSME development, vocational education, and financial inclusion. Meanwhile, Quadrant IV prioritizes agribusiness, investment, job training, and access to education and healthcare. Regional connectivity and basic sanitation improvements are enhanced through government and private sector collaboration.