The Effect of Government Capital Expenditure and Private Investment on Social Welfare (J)

Agus Sumanto1


1(Fakulty of Economics, Universitas Negeri Malang)

2(Fakulty of Economics and Business, Universitas Airlangga)


The main purpose of this study is: 1. Examine and analyze the effect of government capital expenditure on social welfare; 2. Examine and analyze the effect of private investment on social welfare. Technical analysis is path analysis, regresion OLS is used with data panel. Exogenous variables are government capital expenditure and private investment. Endogenous variables are output, labor usage and social welfare,  where output and labor usage  are  mediator  variables.  The  statistical  results  show  that  all  relationship have  a  significant.  Private investment have  more  effect  on  social  welfare  rather  than  goverment capital  expenditure. There  are  two empirical finding from this study: First finding, there is subtitution effect between private investment and labor usage, more private investment, less labor usage. On the other hand, there is output effect between output and labor usage, more output more labor usage. Total effect of private investment on labor usage is positive. Second finding, labor usage have a negative relationship to social welfare, higher labor usage, lower social welfare.

Keywords: capital expenditure, private investment, ouput, labor usage, social welfare

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