Capital Expenditure, Demographic Dynamics, and the Path to Convergence

This study analyzes economic growth determinants and tests economic convergence in Banten Province from 2011 to 2023. Despite fiscal decentralization, severe inequality persists between the industrialized northern region and the agrarian southern region. Utilizing Feasible Generalized Least Squares (FGLS) panel regression and the non-linear Phillips & Sul (2007) log t-test, this research examines capital expenditure, population growth, initial GRDP, Gini Index, and mean years of schooling. Empirical findings indicate capital expenditure and population growth positively affect economic growth. However, Phillips & Sul testing reveals pseudo-convergence, marked by exclusive convergence clubs in industrial centers, while southern regions suffer persistent divergence due to weak trickle-down effects and absorptive capacity deficits. The insignificance of the Gini Index and schooling highlights structural rigidity and skill mismatches. Standard macroeconomic variables alone cannot trigger real growth. Ultimately, policy must shift from a uniform physical infrastructure focus toward targeted affirmative human capital development in lagging southern areas.