Public Spending and Poverty Reduction in Indonesia: The Effects of Economic Growth and Public Spending on Poverty Reduction in Indonesia 2009-2018

Hendrawan Toni Taruno

doi:10.14710/alj.v%vi%i.79-87

DOI: https://doi.org/10.14710/alj.v%25vi%25i.79-87

Public Spending and Poverty Reduction in Indonesia: The Effects of Economic Growth and Public Spending on Poverty Reduction in Indonesia 2009-2018

*Hendrawan Toni Taruno - Central Bureau of Statistics of Central Java Province, Indonesia

Received: 22 Mar 2019; Published: 31 Oct 2019.

Editor(s): Wiwandari Handayani

BibTex Citation Data :

@article{IJPD4524,
    author = {Hendrawan Taruno},
    title = {Public Spending and Poverty Reduction in Indonesia: The Effects of Economic Growth and Public Spending on Poverty Reduction in Indonesia 2009-2018},
    journal = {The Indonesian Journal of Planning and Development},
  volume = {4},
    number = {2},
    year = {2019},
    keywords = {education; growth; health; poverty; public spending; social protection},
    abstract = { Poverty is a complex and multidimensional issue. Over the past four decades, the number of poor in Indonesia has experienced a significant decline, from 40.10 percent in 1976 to 9.82 percent in March 2018. Nevertheless, the disparity of poverty rates between provinces is still quite high. The poverty rate in several provinces in Java Island, for example, is already at the single-digit level, while in Eastern Indonesia, is still more than double-digit level. As it is known, public spending and economic growth are two crucial instruments on poverty reduction programs. This study aims to investigate the role of economic growth and public spending, particularly education, health, and social protection on poverty reduction in Indonesia. By using panel data from 31 provinces during 2009-2018 period, this study used two regression models to analyze the effects of these two variables on poverty reduction, both in urban and rural areas. This study shows that public spending on health and education sectors has a slightly different effect on poverty reduction between urban and rural areas. Convincingly, spending allocation on health and education has had a significant effect to reduce poverty rate in rural areas, while the decline of poverty rates in urban is likely more influenced by spending on health. This study also shows that over the past ten years, economic growth and social protection spending did not have a significant effect on reducing poverty rates. Therefore, in order to reduce poverty more effectively, it would be better for the government to focus its poverty reduction programs on investment in health and education sectors. },
   issn = {2442-983X},   pages = {49--56}  doi = {10.14710/alj.v%vi%i.79-87},
    url = {https://ejournal2.undip.ac.id/index.php/ijpd/article/view/4524}
}

Citation Format:

Abstract

Poverty is a complex and multidimensional issue. Over the past four decades, the number of poor in Indonesia has experienced a significant decline, from 40.10 percent in 1976 to 9.82 percent in March 2018. Nevertheless, the disparity of poverty rates between provinces is still quite high. The poverty rate in several provinces in Java Island, for example, is already at the single-digit level, while in Eastern Indonesia, is still more than double-digit level. As it is known, public spending and economic growth are two crucial instruments on poverty reduction programs. This study aims to investigate the role of economic growth and public spending, particularly education, health, and social protection on poverty reduction in Indonesia. By using panel data from 31 provinces during 2009-2018 period, this study used two regression models to analyze the effects of these two variables on poverty reduction, both in urban and rural areas. This study shows that public spending on health and education sectors has a slightly different effect on poverty reduction between urban and rural areas. Convincingly, spending allocation on health and education has had a significant effect to reduce poverty rate in rural areas, while the decline of poverty rates in urban is likely more influenced by spending on health. This study also shows that over the past ten years, economic growth and social protection spending did not have a significant effect on reducing poverty rates. Therefore, in order to reduce poverty more effectively, it would be better for the government to focus its poverty reduction programs on investment in health and education sectors.

Note: This article has supplementary file(s).

Fulltext View|Download | Copyright Transfer Agreement

Copyright Transfer Agreement

Subject
Type	Copyright Transfer Agreement
	Download (957KB) Indexing metadata

Keywords: education; growth; health; poverty; public spending; social protection

Article Metrics:

Article Info

Section: Articles

Language : EN

In Vol 4, No 2 (2019): October 2019

Recent articles

Developing a Dynamic Model for Sustainable Development in Yogyakarta City Residents' Assessment in Kaligawe Slum Area, Semarang Public Spending and Poverty Reduction in Indonesia: The Effects of Economic Growth and Public Spending on Poverty Reduction in Indonesia 2009-2018 More recent articles

Adams, Jr., R. H. (2003). Economic growth, inequality and poverty: Findings from a new data set (World Bank Policy Research Working Paper No. 2972). Washington, DC: World Bank. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1357182
Ahmad, E., Ayres, R. L., Fields, G., Ribe, H., Squire, L., Suridberg, M., … Walton, M. (1990). World development report 1990: poverty (World Development Report; World Development Indicators). Washington, DC. Retrieved from http://documents.worldbank.org/curated/en/424631468163162670/World-development-report-1990-poverty
Alatas, V., Pritchett, L., & Wetterberg, A. (2003). Voice lessons : local government organizations, social organizations, and the quality of local governance (English) (Policy, Research working paper series No. WPS 2981). Washington, DC. Retrieved from http://documents.worldbank.org/curated/en/218921468766834332/Voice-lessons-local-government-organizations-social-organizations-and-the-quality-of-local-governance
Asghar, N., Hussain, Z., & Rehmaz Ur, H. (2012). The impact of government spending on poverty reduction: Evidence from Pakistan 1972 to 2008. African Journal of Business Management, 6(3), 845–853. doi: 10.5897/AJBM11.922
Birowo, T. (2011). Relationship between government expenditure and poverty rate in Indonesia: comparison of budget classifications before and after budget management reform in 2004. Ritsumeikan Asia Pacific University. Retrieved from https://core.ac.uk/reader/60533650
Biswal, B., Jha, R., & Biswal, U. D. (2001). An empirical analysis of the impact of public expenditures on education and health on poverty in Indian States (Working Paper No. 998)
Central Bureau of Statistics of Central Java Province. (2015). Data dan informasi kemiskinan Provinsi Jawa Tengah 2013-2017. Semarang
Dahmardeh, N., & Tabar, M. H. (2013). Government expenditures and its impact on poverty reduction (empirical from Sistan and Baluchestan Province of Iran). International Journal of Academic Research in Economics and Management Sciences, 2(1), 251–260. Retrieved from https://www.semanticscholar.org/paper/Government-Expenditures-and-its-Impact-on-Poverty-Dahmardeh-Tabar/53e165c9b182bfe569cd3c94a48bd817c08c5d1d
Fan, S., Hazell, P., & Thorat, S. (2000). Government spending, growth and poverty in Rural India. American Journal of Agricultural Economics, 82(4), 1038–1051
Le, M. S., Nguyen, D. T., & Singh, T. (2014). Economic growth and poverty in Vietnam: evidence from elasticity approach. Queensland
Moser, G. G., & Ichida, T. (2001). Economic growth and poverty reduction in Sub-Saharan Africa (Working Paper No. 01/112). International Monetary Fund. Retrieved from https://www.imf.org/en/Publications/WP/Issues/2016/12/30/Economic-Growth-and-Poverty-Reduction-in-Sub-Saharan-Africa-15265
Nugroho, P. E. (2017). Government expenditure, agricultural productivity, and poverty reduction in Indonesia: A simultaneous equations approach. Journal of the Graduate School of Asia-Pacific Studies, 34(9), 39–54. Retrieved from https://core.ac.uk/download/pdf/144469286.pdf
Omari, L. V., & Muturi, W. (2016). The effect of government sectoral expenditure on poverty level in Kenya. Journal of Economics and Sustainable Development, 7(8), 219–242. Retrieved from https://www.iiste.org/Journals/index.php/JEDS/article/viewFile/30094/31128
Sasana, H., & Kusuma, P. (2018). Government expenditure and poverty in Indonesia. In International Conferenceon Economics, Business and Economic Education 2018, KnE Social Sciences (pp. 142–153). doi: 10.18502/kss.v3i10.3125
Son, H. H., & Kakwani, N. (2004). Economic growth and poverty reduction: Initial conditions matter (Working Paper No. 2). Brazil. Retrieved from https://ipcig.org/pub/IPCWorkingPaper2.pdf
Suryahadi, A., Hadiwidjaja, G., & Sumarto, S. (2012). Economic growth and poverty reduction in Indonesia before and after the asian financial crisis. Bulletin of Indonesian Economic Studies, 48(2), 209–227. doi: 10.1080/00074918.2012.694155
Suryahadi, A., Suryadarma, D., & Sumarto, S. (2006). Economic growth and poverty reduction in Indonesia: the effects of location and sectoral components. Jakarta
Wilhelm, V., & Fiestas, I. (2005). Exploring the link between public spending and poverty reduction - lessons from the 90s (English) (Promoting knowledge and learning for a better world). World Bank Institute Working Paper. Washington, DC. Retrieved from http://documents.worldbank.org/curated/en/501641468324280601/Exploring-the-link-between-public-spending-and-poverty-reduction-lessons-from-the-90s
World Bank. (2001). World development report 2000/2001: attacking poverty. World Bank. New York, USA. Retrieved from https://openknowledge.worldbank.org/handle/10986/11856

Last update:

No citation recorded.

Last update:

No citation recorded.

Copyright (c) 2019 The Indonesian Journal of Planning and Development
under http://creativecommons.org/licenses/by-nc-sa/4.0.

The authors submitting a manuscript do so on the understanding that if accepted for publication, copyright of the article shall be assigned to The Indonesian Journal of Planning and Development (IJPD). Copyright encompasses rights to reproduce and deliver the article in all form and media, including reprints, photographs, microfilms and any other similar reproductions, as well as translations.

As an article writer, the author has the right to use their articles for various purposes, including use by institutions that employ authors or institutions that provide funding for research. Author rights are granted without special permission.

Author who publishes a paper at IJPD has the broad right to use their work for teaching and scientific purposes without the need to ask permission, including: used for (i) teaching in the author's class or institution, (ii) presentation at meetings or conferences and distributing copies to participants ; (iii) training conducted by the author or author's institution; (iv) distribution to colleagues for research use; (v) use in the compilation of subsequent authors' works; (vi) inclusion in a thesis or dissertation; (vi) reuse of part of the article in another work (with citation); (vii) preparation of derivative works (with citation); (viii) voluntary posting on open websites operated by authors or author institutions for scientific purposes (follow the CC BY-NC-SA 4.0 License).

Authors and readers can copy and redistribute material in any media or format, and mix, modify, and build material for any purpose but they must provide appropriate credit (provide article citation or content), providing links to the license, and indicate if there are changes.

Reproduce any part of this journal, its storage in the database or its transmission by all forms or media is permitted does not need for written permission from IJPD. However, it should be cited as an honor in academic manners

IJPD and the Department of Urban and Regional Planning of Diponegoro University and the Editor make every effort to ensure that there are no data, opinions, or false or misleading statements published in IJPD. However, the content of the article is the sole and exclusive responsibility of each author.