Effect of neighbouring village conditions and infrastructure interdependency on economic opportunity: A case study of the Yogyakarta region, Indonesia

To determine whether the inclusion of conditions in neighbouring villages and infrastructure interdependency are able to improve the performance of infrastructure–economy interaction models, we compare three related and progressive concepts. The first concept defines economic opportunity in a village as a function of available infrastructure within that village. The second concept includes the effect of economic opportunity in neighbouring villages in addition to available infrastructure within the village. In the third concept, we include the interdependency of infrastructures as another factor affecting the potential level of economic development in the village. We use Ordinary Least Squares (OLS) and a Geographic Information System (GIS) to model the first concept, and we add a spatial-lag model for the second. The third model expands on the second by introducing a Sugeno Fuzzy Inference System (FIS) and a rule-based OLS to capture the nature of infrastructure interdependency. The result of the three models is validated by a known spatial distribution of poverty levels and subjective well-being that serve as proxies for economic opportunity in the Yogyakarta region in Indonesia. The results demonstrate that the third model provides a more accurate prediction of the real conditions and performs consistently better than the other two models. We therefore conclude that conditions in neighbouring villages and infrastructure interdependency influence the economic opportunity of a village and should be considered in policy making regarding resource allocation in infrastructure development.

► We explore if and how interdependency of infrastructure adds to economic opportunity.
► To do this, three models of increasing complexity are developed.
► We test and validate these models for the Yogyakarta region in Indonesia.
► The interdependency model provides the closest prediction to reality.
► We conclude that interdependency modelling should be part of infrastructure planning.