Does Economic Growth Mediate Investment, Inflation, and Human Development Investment on Poverty in Indonesia?

Abstract

Poverty is a classic yet interesting topic of discussion because the problem of poverty has not been solved. This study analyzed the role of economic growth in mediating the effects of investment, inflation, and Human Development Investment (HDI) on poverty in Indonesia. Using the multiple regression method of path analysis and the data from 32 provinces in Indonesia, the results showed that investment had a positive effect on economic growth and poverty, but inflation had no effect on economic growth and poverty while HDI had a positive effect on economic growth but a negative effect on poverty. Economic growth mediated the effect of investment and HDI, but not the effect of inflation on poverty. Hence, it can be said that it is not enough for the government to only prioritize economic growth, optimal investment, a higher level of HDI, and a stable inflation rate. They must also strive to reduce inequality between regions, support labour-intensive, well-targeted and direct investments in the real sector, and involve all stakeholders to achieve an effective and efficient national development in the context of poverty reduction.How to Cite:Fitriady, A., Silvia, V., & Suriani. (2022). Does Economic Growth Mediate Investment, Inflation, and Human Development Investment on Poverty in Indonesia? Signifikan: Jurnal Ilmu Ekonomi, 11(2), 437-456. https://doi.org/10.15408/sjie.v11i2.26145.JEL Classification: C33, E22, O11

The GRDP per capita, human development index, open unemployment rate, regional expenditure, and poverty in East Java Province

“…An increase in HDI increases labor productivity and therefore the ability of the community due to improved capabilities of community and individuals. These findings are consistent with the previous research by (Fitriady et al, 2022;Rohmi et al, 2021), which also found a negative association between HDI and poverty. The components of HDI are directly linked to community productivity.…”

“…Improving living standards, health, and education can be crucial strategies for breaking the cycle of poverty. Previous research has shown that poverty reduction can be achieved through improving the standard of human resources including health, education, and living standards as measured by HDI (Fitriady et al, 2022;Nainggolan, Sembiring, & Nainggolan, 2021;Purnomo, 2019). However, according to research by (Ipmawan et al, 2022), poverty is not significantly affected by HDI, and therefore an increase in HDI is not invariably accompanied by a decline in poverty.…”