Effectiveness of Regional Government Expenditure in Reducing Unemployment and Poverty Rate

Abstract

Poverty rate in Indonesia is currently relatively high that requires real action from the government to reduce it. The government efforts to reduce the poverty rate are reflected in the government expenditure. This research reveals the regional government expenditure effectiveness in reducing poverty and unemployment rate in South Sulawesi Province. Data used in the research are panel data, which is a combination of cross-section data of 24 regencies and city and time series data in 2009-2018. The data will be analyzed using econometric models with simultaneous equation system. The research finds that private investment has a significant influence in reducing poverty rate, whereas capital expenditure has a significant influence in increasing private investment. Moreover, investment has a significant influence in improving gross regional domestic product in industrial sector as well as other sectors. Population has a positive influence in improving poverty rate indicating that regional government should support the planned family policy. The result of policy simulation indicates that an increase in capital expenditure, total government expenditure, and goods and services expenditure by the regional government, brings positive impact on economic growth and poverty reduction.