Analysis of Public Expenditure and Economic Growth in Reducing Poverty in North Sumatra

Oct 13, 2025 by wbrum.org 19 views

Analysis of Public Expenditure and Economic Growth in Reducing Poverty in North Sumatra

Introduction

North Sumatra, a province in Indonesia, is one of the regions that face significant challenges in reducing poverty. With a diverse population and various regions, the province has struggled to make progress in poverty reduction. This study aims to analyze the effect of public expenditure and economic growth on poverty in North Sumatra during the 25-year period (1984-2005) using panel data. The study employed a Generalized Least Squares (GLS) with a random effect model based on hausman tests to examine the relationship between public expenditure, economic growth, and poverty.

Background

North Sumatra is a province with a rich cultural heritage and diverse population. The province is home to several ethnic groups, including the Batak, Karo, and Gayo. Despite its rich cultural diversity, North Sumatra faces significant challenges in reducing poverty. The province has a high poverty rate, with many people living below the poverty line. The poverty rate in North Sumatra is higher than the national average, making it one of the poorest provinces in Indonesia.

Methodology

This study used panel data from 25 cities in North Sumatra during the 25-year period (1984-2005). The data was analyzed using a Generalized Least Squares (GLS) with a random effect model based on hausman tests. The study examined the relationship between public expenditure, economic growth, and poverty. The results of the study showed that public expenditure had a negative influence on the poverty rate in North Sumatra, but was not significant. This means that an increase in public expenditure can indirectly reduce the number of poor people.

Results

The results of the study showed that economic growth has a positive and significant influence on the number of poor people in North Sumatra. This means that increasing economic growth has the potential to increase the number of poor people. The study also found that regional autonomy has a positive and significant influence on the number of poor people in North Sumatra. This means that regional autonomy has the potential to increase the number of poor people.

Discussion

The results of this study indicate that an increase in public spending does not directly reduce poverty in North Sumatra. This may be caused by several factors, such as the lack of effectiveness of poverty alleviation programs, low quality of infrastructure and human resources, as well as the low level of community participation in poverty alleviation programs. Meanwhile, increased economic growth has the potential to increase the number of poor people. This can happen because of uneven economic growth, so that only a small number of people feel the benefits.

Regional autonomy, which is expected to improve the welfare of the community, has the potential to increase the number of poor people. This may be caused by the lack of regional capabilities in managing resources and poverty alleviation programs effectively.

Recommendations

This study provides several recommendations to overcome poverty in North Sumatra:

Increasing the effectiveness of poverty alleviation programs: Poverty alleviation programs need to be better designed and implemented on target to reach the maximum impact.
Improving the quality of infrastructure and human resources: Investment in infrastructure and education can increase community productivity and open new job opportunities, which in turn can reduce poverty.
Strengthening community participation: Increasing community participation in poverty alleviation programs can increase the effectiveness of the program and ensure that the program really helps the poor.
Encouraging inclusive economic growth: Economic growth must be designed in such a way as to provide benefits for all levels of society, not just a small part.
Increasing the capacity of the area in managing resources and programs: Increasing regional capacity in managing resources and programs can help regions in overcoming poverty more effectively.

Conclusion

This study provides an important picture of the effect of public expenditure, economic growth, and regional autonomy on poverty in North Sumatra. The recommendations given can be a reference for the government and stakeholders in formulating effective strategies to reduce poverty in the region. The study highlights the need for effective poverty alleviation programs, improved infrastructure and human resources, and increased community participation in poverty alleviation programs.

Limitations

This study has several limitations. The study used panel data from 25 cities in North Sumatra, which may not be representative of the entire province. The study also used a Generalized Least Squares (GLS) with a random effect model based on hausman tests, which may not be the most appropriate method for analyzing the relationship between public expenditure, economic growth, and poverty.

Future Research

This study provides a foundation for future research on poverty reduction in North Sumatra. Future research can build on the findings of this study and examine the effectiveness of poverty alleviation programs, the impact of infrastructure and human resources on poverty reduction, and the role of community participation in poverty alleviation programs.

References

[1] World Bank. (2019). Poverty and Shared Prosperity 2019: Reversals of Fortune.
[2] United Nations Development Programme. (2019). Human Development Index 2019.
[3] Government of Indonesia. (2019). National Medium-Term Development Plan 2020-2024.
[4] Ministry of Home Affairs. (2019). Regional Autonomy in Indonesia.

Appendices

[1] List of cities in North Sumatra.
[2] Data on public expenditure, economic growth, and poverty in North Sumatra.
[3] Results of the Generalized Least Squares (GLS) with a random effect model based on hausman tests.
Frequently Asked Questions (FAQs) about Public Expenditure and Economic Growth in Reducing Poverty in North Sumatra

Q: What is the main objective of this study?

A: The main objective of this study is to analyze the effect of public expenditure and economic growth on poverty in North Sumatra during the 25-year period (1984-2005) using panel data.

Q: What is the methodology used in this study?

A: The study employed a Generalized Least Squares (GLS) with a random effect model based on hausman tests to examine the relationship between public expenditure, economic growth, and poverty.

Q: What are the key findings of this study?

A: The study found that public expenditure had a negative influence on the poverty rate in North Sumatra, but was not significant. This means that an increase in public expenditure can indirectly reduce the number of poor people. The study also found that economic growth has a positive and significant influence on the number of poor people in North Sumatra, and regional autonomy has a positive and significant influence on the number of poor people in North Sumatra.

Q: What are the implications of this study?

A: The study highlights the need for effective poverty alleviation programs, improved infrastructure and human resources, and increased community participation in poverty alleviation programs. The study also suggests that regional autonomy may not be the most effective way to reduce poverty in North Sumatra.

Q: What are the limitations of this study?

A: The study has several limitations, including the use of panel data from 25 cities in North Sumatra, which may not be representative of the entire province. The study also used a Generalized Least Squares (GLS) with a random effect model based on hausman tests, which may not be the most appropriate method for analyzing the relationship between public expenditure, economic growth, and poverty.

Q: What are the recommendations of this study?

A: The study provides several recommendations to overcome poverty in North Sumatra, including:

Increasing the effectiveness of poverty alleviation programs
Improving the quality of infrastructure and human resources
Strengthening community participation
Encouraging inclusive economic growth
Increasing the capacity of the area in managing resources and programs

Q: What are the future research directions?

A: This study provides a foundation for future research on poverty reduction in North Sumatra. Future research can build on the findings of this study and examine the effectiveness of poverty alleviation programs, the impact of infrastructure and human resources on poverty reduction, and the role of community participation in poverty alleviation programs.

Q: What are the policy implications of this study?

A: The study highlights the need for policymakers to design and implement effective poverty alleviation programs, improve infrastructure and human resources, and increase community participation in poverty alleviation programs. The study also suggests that policymakers should consider the potential negative effects of regional autonomy on poverty reduction in North Sumatra.

Q: What are the implications for development practitioners?

A: The study highlights the need for development practitioners to work closely with policymakers and community leaders to design and implement effective poverty alleviation programs. The study also suggests that development practitioners should consider the potential negative effects of regional autonomy on poverty reduction in North Sumatra.

Q: What are the implications for researchers?

A: The study highlights the need for researchers to use more advanced statistical methods to analyze the relationship between public expenditure, economic growth, and poverty. The study also suggests that researchers should consider the potential limitations of using panel data from a limited number of cities in North Sumatra.

Q: What are the implications for the community?

A: The study highlights the need for the community to be involved in poverty alleviation programs and to have a say in the design and implementation of these programs. The study also suggests that the community should be aware of the potential negative effects of regional autonomy on poverty reduction in North Sumatra.