Implementation of spatial panel cross-correlation on the growth of GRDP and the level urbanization of regencies/municipalities in East Java, 2014-2019

Variables related to regional economic and regional welfare indicators commonly have spatial interaction between regions. The observed value of these variables in each region, completed with the region's geographic information, yield a set of spatial data. The spatial interaction is measured by spatial autocorrelation. Positive spatial autocorrelation exists when a change in the value of one variable affects the same variable in another region. It is also common that the change of a variable in a region is affected by the change of other variables of the surrounding regions. In this case, the degree of the existing interaction is measured by Spatial Cross Correlation. The available studies, however, only considers the one-time interaction, and rarely accommodate the time dimension in the correlation measure. Considering that any economic phenomenon is mostly dynamic in nature, the objective of this study is to accommodate the time dimension in the Spatial Cross Correlation Measure, based on a set of spatial panel data. The proposed method is then applied to measure the Spatial Cross Correlation between East Java's growth of GRDP and the level of urbanization, in 2014-2020. The proposed method is succeeded in capturing a positive spatial correlation between the level of urbanization and the growth of GRDP.