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Special Allocation Fund and Poverty Rate in Indonesia

Author

Listed:
  • Danesta Febianto Nugroho

    (Graduate School of International Relations, International University of Japan (IUJ), Japan)

  • Bayu Rhamadani Wicaksono

    (Graduate School of Economics, Ritsumeikan University, Japan)

  • Muhammad R. Reynaldi

    (Faculty of Economics and Business, Universitas Padjadjaran, Indonesia)

Abstract

The Special Allocation Fund is distributed to specific areas to aid them in funding special regional activities that follow national interests. Giving regional government’s broad autonomy is meant to hasten the realization of social welfare, as seen by reducing poverty. This study aims to examine the influence of the Special Allocation Fund for education, health, and infrastructure on the poverty rate in Indonesia, using the Poverty Gap Index (P1) as a proxy for the poverty rate. The study employed annual data from 33 Indonesian provinces from 2015 to 2018 and panel data regression analysis utilizing the Fixed Effects Model (FEM). The study discovered that the Special Allocation Fund for Education and Health has a negative and significant impact on poverty, but the Special Allocation Fund for Infrastructure has a positive but not significant impact on poverty. The central and regional governments must work together to guarantee that the Special Allocation Fund is distributed effectively to sectors directly relevant to poverty reduction efforts.

Suggested Citation

  • Danesta Febianto Nugroho & Bayu Rhamadani Wicaksono & Muhammad R. Reynaldi, 2021. "Special Allocation Fund and Poverty Rate in Indonesia," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 67, pages 257-269, Desember.
    • Handle: RePEc:lpe:efijnl:202117
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    More about this item

    Keywords

    special allocation fund; education; health; infrastructure; poverty rate; poverty gap index;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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