Economic Globalization and Environmental Quality: a Spatial Analysis of Spillover Effects in Indonesia

Sustainable development is where development is implemented based on economic, social, and environmental principles. However, in the era of globalization, environmental principles are often neglected. The aim of this research is to measure the spatial impact of the economic globalization process on environmental quality in various regions in Indonesia. This involves identifying spillover patterns or cross-regional impacts of global economic activity. The variables used are environmental quality, globalization as seen in terms of economic openness, foreign direct investment, industry’s share of GDP, population growth, and the quality of human resources. This research uses a spatial econometric approach through a comparison between the Spatial Lag Model, Spatial Lag of X Model, and Spatial Error Model. Data are sourced from 33 provinces in Indonesia during the 2011-2022 period. The data in this research are secondary data taken from the Ministry of Environment and Forestry and also the Indonesian Central Statistics Agency. The research results show that environmental quality is affected by openness to trade, industry’s share of GDP, and the quality of human resources. Spillover effects on adjacent areas occur if there are changes in openness to trade, industry’s share of GDP, and the quality of human resources. Regional government policies are needed that are based on coordination between neighboring regions to minimize negative externalities.