The Impact of Unemployment, Minimum Wage, and Real Gross Regional Domestic Product on Poverty Reduction in Provinces of Indonesia

Abstract

Poverty often impedes economic development in numerous countries, Indonesia included. Poverty, as a result of the failure of economic development, must continue to be suppressed and a solution sought, so that poverty no longer causes adverse effects for the country. The purpose of this study is to examine the impact of unemployment, minimum wage, and real gross regional domestic product (GRDP) on poverty reduction in the provinces of Indonesia. Using periodic data from the Central Bureau of Statistics (Badan Pusat Statistik-BPS) over the period 2010-2019, the fixed effect model of the panel data analysis is estimated. The result showed that unemployment and wage had a significant positive effect on poverty in provinces of Indonesia. Meanwhile, the real GRDP had a significant negative effect on poverty in Indonesia. Thus, government policy must focus on reducing unemployment, maintaining price stability to preserve wage levels and purchasing power, and increasing the real GRDP to reduce poverty in Indonesia. Contribution/Originality: This study contributes to the existing literature in the field of human resource economics, particularly on the issue of poverty reduction. This study is one of the few studies that uses panel data and estimation using the fixed effect model on provinces in a country experiencing issues relating to poverty.

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Analysis of Panel Data of Poverty in Aceh Province

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