Factors Affecting Poverty in Indonesia: A Panel Data Approach

Abstract

Poverty is a significant disease in economic development. Thus, the main objective of a country's economic development is to reduce the number of poor people by increasing gross regional domestic product, investment, regional spending, and infrastructure. The purpose of this study is to see and analyze the impact of an increase in gross regional domestic product, investment, regional spending, and infrastructure improvements on the number of poor people. This study uses panel data regression with path analysis. This method can explain the correlated variables by using a sequential model temporarily and identify the path of the cause of a particular variable to other variables that are influenced by it. Data sources come from the Central Bureau of Statistics and Bank Indonesia from 34 provinces in 2015-2019. The study results indicate that an increase in investment and regional spending indirectly affects the reduction of the number of poor people through an increase in the gross regional domestic product. Investment, exchange rates, road length, human development index, and regional spending affect economic growth. Regional expenditure and total population directly affect the number of poor people, while investment does not directly affect the number of poor people.