Economic growth in the industrial sector is still the main goal and an important indicator of the success of regional economic development. The district of Rembang has fluctuated economic growth rate and still low if compared to other districts in the provinces of Central Java. The purpose of this study is to determine the progress of government expenditure allocation of industrial sector and examines its effect on economic growth in the industrial sector in Rembang District. In reviewing the effect of government spending, the analysis conducted with other related variables that is Labor. Data that used are GDRP (Growth Domestic Regional Product), expendeture govermentand labor data in the industrial sector from 2006 to 2014. This data consists of the time series data (2006-2014) and cross section data (14 sub-districts) in Rembang District published by BPS Rembang District. This research used panel data method with Random Effects Model approach. Research results show that government expenditure and amount of labor in the industrial sector have significant positive impact on regional economic growth. Finally, the role of local government through government expenditure to stimulate labor absorption is expected to be able to increasing regional economic activity in order to achieve economic growth and increasing per capita income of people
