Analysis Of Factors Determining Poverty In Five Provinces On The Island Of Java

Abstract

Poverty is a prevalent issue across various countries and is recognized as a macroeconomic problem, inherently multidimensional in nature. It is influenced by factors such as inflation, unemployment, the Human Development Index (HDI), labor productivity, and the COVID-19 pandemic. This study employs a dynamic panel approach, specifically the System Generalized Method of Moments (System GMM). The findings indicate that inflation contributes to an increase in poverty. A positive effect suggests that higher inflation rates are associated with elevated poverty levels. Unemployment also exacerbates poverty. The positive relationship implies that joblessness or job loss reduces individual income, leading to decreased purchasing power and lower household consumption expenditure. Conversely, the Human Development Index (HDI) has the potential to alleviate poverty. Improvements in HDI directly reduce poverty by equipping individuals with sufficient human capital to escape the trap of low income and limited economic access. Similarly, labor productivity negatively impacts poverty, indicating that higher labor productivity corresponds with lower poverty rates. The COVID-19 pandemic has intensified poverty levels. Supply and demand shocks during the pandemic caused a decline in household consumption expenditure, which in turn increased poverty rates.