The The Impact of Government Social Spending on Poverty Alleviation in Indonesia: An Empirical Public Economics Approach
Keywords:
government social spending, poverty, fiscal policy, public economics
Abstract
This study aims to analyze the effect of government social spending on poverty levels in Indonesia. The government social spending analyzed includes education, health, and social protection spending. Furthermore, this study incorporates macroeconomic variables such as economic growth and unemployment as control variables. This study uses a quantitative method with multiple linear regression using regression - Ordinary Least Squares (OLS) approach over the 2015–2025 time horizon. The data used are secondary data obtained from the Central Statistics Agency (BPS), the World Bank, and official government publications. Diagnostic tests confirm that the model satisfies all Gauss-Markov assumptions, demonstrating normally distributed residuals, no multicollinearity, no heteroskedasticity, and no serial correlation. Individually, education expenditure (EDU) and the unemployment rate (UE) exert statistically significant positive effects (p < 0.05), with unemployment being the most dominant expanding factor. Conversely, economic growth (GROWTH) demonstrates a significant mitigating role through a negative relationship (p < 0.10). These findings indicate that regional development policies must prioritize labor market stability and human capital investment alongside economic expansion.
References
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Ravallion, M. (2016). The economics of poverty: History, measurement, and policy. Oxford University Press.
Saputra, W. (2019). Analysis of public spending efficiency on welfare indicators in developing countries. Southeast Asian Economic Review, 14(1), 55–72.
Schultz, T. W. (1961). Investment in human capital. The American Economic Review, 51(1), 1–17.
Sen, A. (1999). Development as freedom. Oxford University Press.
Suryanto, T. (2021). Determinants of economic growth in developing territories: A residual-based diagnostic approach. Journal of Development Economics and Finance, 8(2), 145–158.
Todaro, M. P., & Smith, S. C. (2015). Economic development (12th ed.). Pearson.
Widjaja, A. (2020). Economic expansion and localized welfare dynamics: Evidence from decentralized regimes. Journal of Economic Policy Reforms, 23(3), 245–261.
Wooldridge, J. M. (2020). Introductory Econometrics: A Modern Approach (7th ed.). Cengage Learning.
World Bank. (2018). The state of social safety nets 2018. World Bank Group.
Asmuni, A., & Saputra, H. (2021). Fiscal policy and poverty reduction in emerging economies: The case of Indonesia. Journal of Indonesian Fiscal Policy, 3(2), 115–128.
Asteriou, D., & Hall, S. G. (2021). Applied Econometrics (4th ed.). Palgrave Macmillan.
Barrientos, A., & Hulme, D. (2016). Social protection for the poor and poorest in developing countries: Reflections on a quiet revolution. World Development, 87, 45–56.
Becker, G. S. (1964). Human capital: A theoretical and empirical analysis, with special reference to education. National Bureau of Economic Research.
Bloom, D. E., Canning, D., & Sevilla, J. (2004). The effect of health on economic growth: A production function approach. World Development, 32(1), 1–13.
Constitutional Court of the Republic of Indonesia. (2008). Decision Number 13/PUU-VI/2008 concerning the allocation of 20% education budget in APBN/APBD. Mahkamah Konstitusi Republik Indonesia.
Dollar, D., & Kraay, A. (2002). Growth is good for the poor. Journal of Economic Growth, 7(3), 195–225.
Grossman, M. (1972). On the concept of health capital and the demand for health. Journal of Political Economy, 80(2), 223–255.
Gujarati, D. N., & Porter, D. C. (2009). Basic Econometrics (5th ed.). McGraw-Hill Irwin.
Handoko, B. (2022). Labor market adjustments and socio-economic dynamics in emerging economies: A multivariate approach. Journal of Regional Development Initiatives, 15(4), 312–327.
Hidayat, R., & Siregar, F. (2023). The role of social safety nets during macroeconomic crises: Lessons from Indonesian fiscal interventions. International Journal of Economics, Business and Innovation Research, 2(01), 45–59.
Lestari, S., & Pratama, I. (2024). Reassessing the education budget allocation and labor productivity in developing markets. International Journal of Economics, Business and Innovation Research, 3(02), 89–104.
Lestari, W. (2023). Macroeconomic policy adjustments and labor market dynamics: A serial correlation-robust time series analysis. Journal of Indonesian Applied Economics, 11(2), 89–104.
Musgrave, R. A., & Musgrave, P. B. (1989). Public finance in theory and practice (5th ed.). McGraw-Hill.
Nugroho, B., & Setiawan, D. (2023). Economic growth dynamics, unemployment, and the persistent poverty trap in Southeast Asia. International Journal of Economics, Business and Innovation Research, 2(04), 312–327.
Nugroho, S. B. (2023). Public sector expenditure and regional development dynamics: An empirical assessment of classical linear model assumptions. Indonesian Journal of Development Economics, 19(1), 42–55.
Okun, A. M. (1962). Potential GNP: Its measurement and significance. Proceedings of the Business and Economic Statistics Section of the American Statistical Association, 98, 132–145.
Prasetyo, P. E., & Zuhdi, F. (2013). The human capital efficiency and its impact on poverty reduction. International Journal of Social Economics, 40(11), 982–995.
Pratama, A. R. (2022). Fiscal spending allocation and macroeconomic stability in emerging markets: A collinearity-robust analysis. Journal of Economic Development Literature, 14(3), 201–215.
Putri, E. R., & Ramadhan, G. (2025). Fiscal decentralization, social spending efficiency, and poverty alleviation in island states. International Journal of Economics, Business and Innovation Research, 4(01), 12–29
Ram, R. (2019). Public expenditure on education and economic aggregates: Re-evaluating structural relationships. Economics of Education Review, 72, 101–114.
Ravallion, M. (2016). The economics of poverty: History, measurement, and policy. Oxford University Press.
Saputra, W. (2019). Analysis of public spending efficiency on welfare indicators in developing countries. Southeast Asian Economic Review, 14(1), 55–72.
Schultz, T. W. (1961). Investment in human capital. The American Economic Review, 51(1), 1–17.
Sen, A. (1999). Development as freedom. Oxford University Press.
Suryanto, T. (2021). Determinants of economic growth in developing territories: A residual-based diagnostic approach. Journal of Development Economics and Finance, 8(2), 145–158.
Todaro, M. P., & Smith, S. C. (2015). Economic development (12th ed.). Pearson.
Widjaja, A. (2020). Economic expansion and localized welfare dynamics: Evidence from decentralized regimes. Journal of Economic Policy Reforms, 23(3), 245–261.
Wooldridge, J. M. (2020). Introductory Econometrics: A Modern Approach (7th ed.). Cengage Learning.
World Bank. (2018). The state of social safety nets 2018. World Bank Group.
Published
2026-06-21
How to Cite
Ikhsana, N. R., Yohanes Novi Armunanto, & Qurrota Ayu Nindien. (2026). The The Impact of Government Social Spending on Poverty Alleviation in Indonesia: An Empirical Public Economics Approach. International Journal of Economics, Business and Innovation Research, 5(04), 1889-1903. https://doi.org/10.63922/ijebir.v5i04.4497
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