Abstract
Agriculture is the primary sector in many provinces in Indonesia. In fact, most of the rural communities work in the agricultural sector. Nevertheless, the poverty level in rural areas remains high. Therefore, this study was aimed at investigating the performance of the agricultural sector in reducing the rural poverty level in Indonesia, and to investigate factors that contribute as a determinant in reducing rural poverty level in Indonesia. This study was significant, considering that the result was to contribute to government policy evaluation in the agricultural sector, especially in reducing poverty in rural areas. This study used quantitative analysis through multiple regressions with data panel from 2014 to 2017 from 33 provinces in Indonesia. This study revealed that the increase of agricultural sector share and the widening of the income distribution had caused an increase in poor people in a rural area. This finding also revealed that the income distribution gap was a determinant to the severity of rural poverty. The growth in the agricultural sector to contribute toward the economy could reduce rural poverty level in Indonesia. Meanwhile, agricultural financing, economic growth, inflation, and the farmer exchange rate had not significantly contributed to reducing the poverty level.
Highlights
Contribution of the agricultural sector in Indonesia toward national economic development is no longer dominant
From the above previous studies and empirical data, this study aims to determine the performance of the agricultural sector in reducing the poverty rate in rural areas of Indonesia as well as the factors contributing to the poverty reduction
The low contribution of the agricultural sector in these two provinces was assumed that the non-agricultural sectors are developing and ease the poverty reduction problems in the rural area
Summary
Contribution of the agricultural sector in Indonesia toward national economic development is no longer dominant. The contribution of the processing industry is becoming more significant. This signifies the economic transformation process in Indonesia. The contribution of primary sectors, especially agriculture is about 13.92 percent, whereas the manufacturing industry contribution is about 20.26 percent. Regardless that this shift is yet followed by the shift of labor structure, as labors in the agricultural sector are still dominant in several provinces by on average above 30
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