Economic Growth Vs. Poverty in Indonesia: What has Happened?

Abstract

West Java is one of Indonesia’s three biggest contributors to GDP. The rate of economic growth in the province is also the highest on the island of Java, but it does not make West Java free from poverty. The fact, this smart province is the second poorest province nationally. The purpose of this study is to estimate the relationship and influence between economic growth, inequality, and poverty in West Java province using panel data. This study also analyses the characteristics of West Java’s economic growth using the Growth Incidence Curve (GIC). The panel data consists of combination of time series and cross section data from 2013-2022 period, based on information from 27 districts in West Java province. The estimation model employed in this study is panel regression model utilizing Random Effect Model (REM). The results of the study reveal a negative and significant effect of the economic growth on poverty. Furthermore, the inequality variable has a positive and significant impact on poverty. Based on GIC, West Java’s economic growth has not been pro-poor yet from the 2012-2022 period.