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Abstract

Although cooperatives are widely regarded as an important part of Indonesia’s economy and have a  large membership base, the contribution of cooperatives to regional economic output in Indonesia has never been systematically examined. This study provides the first multi-year, fixed-effects panel evidence of cooperative–GRDP linkages for all 34 Indonesian provinces (2017–2023) in a Cobb-Douglas production function framework with province and year fixed effects. Two outcome variables are estimated: Gross Regional Domestic Product (GRDP) and the Unemployment Rate (Unemp). The findings indicate that active cooperatives are associated with higher provincial GRDP and lower open unemployment; despite, the associations should be read as conditional correlations rather than established causal effects. Among governance and performance indicators, the implementation of Annual Member Meetings (RAT) is the strongest predictor of output, substantially outperforming membership size and aggregate capitalisation, while internal capital is associated with higher GRDP and external capital exhibits a consistently negative direction consistent with consumptive lending dynamics. The disaggregation of cooperative type reveals that only Village Unit Cooperatives (KUD) show a statistically significant positive effect on provincial GRDP. This due to their vertically integrated, multi-purpose structure and their involvement in national food security programs. Meanwhile, savings-and-loan (Kospin) and craft (Inkra) cooperatives produce statistically insignificant effects. These findings extend the governance-performance nexus to Southeast Asia, provide regional macroeconomic-level evidence on the productive versus consumptive capital distinction, and offer the first type-disaggregated panel evidence for Indonesian cooperative policy. The results suggest a reorientation of national cooperative policy from quantity-based expansion toward institutional quality, governance strengthening, and value chain integration.

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