The Influential of Private Investment, Public Investment on Economic Growth and Labor Absorption and Public Welfare of District/City in East Java Province Achmad Daengs Gatot Soeherman, Djoko Mursinto and Tri Ratnawati Abstract--This study aims to determine the effect of private investment, public investment on economic growth and employment as well as the livelihoods of the urban districts in East Java province. Studies conducted on the district or a city located in East Java Province. Furthermore, the whole district is located in the city of East Java Province. Exogenous constructs (X) is : Private investment variables and public investment. Among the variables (Y) is : Economic growth and labor absorption. Endogenous constructs include the public welfare. To test the seven hypotheses used path analysis is a technique to analyze the causal relationships that occur in multiple regression when the independent variables affect the dependent variable not only directly but also indirectly. Conclusion The results of this study were (1) Public investment have a significant effect on economic growth, (2) Private investment has no significant effect on economic growth, (3) Investment significant effect on the government's employment, (4) Economic growth significantly influence the energy absorption employment, (5) economic growth have a significant effect on the public welfare, (6) the absorption of labor significantly influence the public welfare. Keywords--private investment, public investment, economic growth, employment and livelihoods of communities I. INTRODUCTION Todaro (2004:62) states that the development is a multidimensional process that includes important changes in the social structure, the attitudes of the people and national institutions, as well as the acceleration of economic growth, reduction of inequality, and the eradication of absolute poverty. Djojohadikusomo (1994:4) states regarding the development in addition to quantitative changes in production and income, also includes qualitative changes in the governance structure of society as a whole. Economic development is a transformation in terms of structural changes, i.e. changes in the economic structure of society which include changes in the balances of conditions attached to the foundation and the form of the economic activity in the community. The Indonesian government has set a target of economic policy is to improve the public welfare that is supported by an increase in employment opportunities and poverty reduction. Therefore the President in charting the work meeting of the Ministry of Trading on July 18, 2007, about eight development priorities in 2008, that are: (1) Increased investment, exports, and employment opportunities; (2) the revitalization of agriculture, fisheries, forestry and rural development; (3) acceleration of infrastructure development and management of energy; (4) improving access and quality of education and health; (5) increasing the effectiveness of poverty reduction; (6) combating corruption and acceleration of bureaucratic reforms; (7) strengthening the defense capability and stabilization of internal security; (8) disaster response to disaster risk reduction, and an increase in communicable disease control (the Secretary General of the Department of Trading Meeting’s Exposure of the Ministry of Trading, Jakarta July 18, 2007). Economic growth is one of the efforts in accelerating the engine of growth for development, due to the acceleration of economic growth will be able to push the performance of the sectors there are other more efficient and productive. High economic growth will be able to create a greater income distribution and improve the public welfare. High economic growth coupled with efficient resource allocation and effective can be a stimulus to development, especially in developing countries. In addition, the multiplier effects of greater economic growth in national development (side products). This will drive the economic sectors in the economy in the future (Todaro, 2000:132). Therefore, the economic growth will be one of the important indicators to analyze the economic development taking place in a country. Investment growth plays an important role in economic growth, because investment expenditure component is quite large and variable, thus a large DOI: 10.5176/2010-4804_3.4.342 GSTF Journal on Business Review (GBR) Vol.3 No.4, November 2014 © 2014 GSTF 45 brought to you by CORE View metadata, citation and similar papers at core.ac.uk provided by GSTF Digital Library (GSTF-DL): Open Journal Systems (Global Science and Technology...