Spatially Heterogeneous Climate Shocks and Regional Economic Vulnerability: A Spatial Panel Econometric Analysis of El Niño Impact Across Indonesian Provinces

Abstract

This study examines whether El Niño climate shocks generate spatially heterogeneous economic impacts across provinces in Indonesia. The analysis employs a spatial panel econometric framework that leverages the geographically polarized structure of El Niño impacts in Indonesia, characterized by extreme drought in the southern and western provinces and flood anomalies in the eastern archipelago. The dataset covers 38 provinces over the period 2000 to 2025, using a Spatial Durbin Model (SDM) estimated via Maximum Likelihood. The study decomposes the total effect of El Niño intensity, measured by the average Oceanic Niño Index (ONI) from April to October, into direct effects and indirect effects in the form of spatial spillovers on provincial real GDP per capita growth, poverty rates, and the share of agricultural value added. The estimation results indicate that a one unit increase in ONI reduces real GDP per capita growth by 0.84 percentage points in directly affected provinces, while spatial spillover effects add a further loss of 0.38 percentage points in neighboring provinces. These effects weaken significantly in provinces with stronger irrigation infrastructure and higher levels of economic diversification. The findings suggest that climate risks in an archipelagic country operate through spatially interconnected channels and are systematically overlooked by uniform national policies. The results provide empirical evidence to inform region based disaster preparedness allocation and interprovincial climate resilience coordination in Indonesia.