Inclusive economic growth and fiscal intervention: could it reduce poverty, inequality, and unemployment in East Java?

Dyah Purwanti

Abstract


Before the COVID-19 pandemic, East Java Province (then abbreviated to East Java) made remarkable achievements in economic growth accompanied by a continuing downward trend in poverty. Then, after the COVID-19 pandemic broke out in 2020, it had a detrimental impact in terms of health, economics and social aspects. Specifically for East Java, the outbreak caused a severe contraction in the economy and significantly increased the number of local unemployed. However, long before COVID-19, East Java was facing wide inequality. Based on these problems, this study evaluates whether inclusive growth and local government fiscal intervention are solutions. These two factors have been recommended by economist as an effective strategies for reducing the triple problem in East Java. Fiscal intervention is interpreted as expenditure policies in economic, education, and health functions. Using panel data regression during 2015-2021, the study documents that economic growth in East Java still needs to be fully inclusive. This is based on the finding that inclusive economic growth does not simultaneously reduce triple problems (poverty, inequality and unemployment). Inclusive growth reduces poverty in East Java, but it has the opposite effect on unemployment and inequality. On the one hand, positive findings are documented in which fiscal intervention in education spending plays a significant role in reducing poverty. Unfortunately, this study failed to find the determining factors that provide a solution to inequality and unemployment in East Java. These evidences certainly have implications for reviewing the quality of inclusive growth and local government expenditure policies.

Keywords


Inclusive Economic Growth; Fiscal Intervention; Local Spending; Poverty; Inequality; Unemployment

Full Text:

PDF

References


Adeleye, B. N. (2023). Income Inequality, Human Capital and Institutional Quality in Sub-Saharan Africa. Social Indicators Research, 171(1), 133–157. https://doi.org/10.1007/s11205-023-03244-0

Alif, M. G., Pangaribuan, C. H., Wahyuni, M., & Manurung, A. H. (2020). Accelerating economic development: Resource-based view and value creation at village level. International Journal of Advanced Science and Technology, 29(5), 4409-4425

Amakom, U. (2013). Public Spending on Education and Health in Nigeria: a Benefit Incidence Analysis. African Economic Research Consortium (Issue January).

Amponsah, M., Agbola, F. W., & Mahmood, A. (2023). The relationship between poverty, income inequality and inclusive growth in Sub-Saharan Africa. Economic Modelling, 126, 106415. https://doi.org/10.1016/j.econmod.2023.106415

Anand, R., Tulin, V., & Kumar, N. (2014). India: Defining and Explaining Inclusive Growth and Poverty Reduction. IMF Working Papers, 14(63), 1. https://doi.org/10.5089/9781484354230.001

Arham, M. A., & Hatu, R. (2020). Does Village Fund Transfer Address the Issue of Inequality and Poverty? A Lesson from Indonesia. The Journal of Asian Finance, Economics and Business, 7(10), 433–442. https://doi.org/10.13106/jafeb.2020.vol7.no10.433

Arsani, A. M., Ario, B., & Ramadhan, A. F. (2020). Impact of Education on Poverty and Health : Evidence from Indonesia. Economics Development Analysis Journal, 9(1), 87–96. https://doi.org/10.15294/edaj.v9i1.34921

Asrol, A., & Ahmad, H. (2018). Analysis of factors that affect poverty in Indonesia. Revista Espacios, 39(45).

Bah, M. S. (2015). Real convergence in West African Economic and Monetary Union (WAEMU). Economics Letters, 135, 19–23. https://doi.org/10.1016/j.econlet.2015.07.020

Bourguignon, F., Ferreira, F., & Menéndez, M. (2003). Inequality of Outcomes, Inequality of Opportunities in Brazil. William Davidson Institute, October, 1–43.

BPS - Statistics Indonesia. (2019). Percentage of Poor People In Disadvantaged Areas (Percent), 2018-2020. https://www.bps.go.id/en/statistics-table/2/MTIzOCMy/persentase-penduduk-miskin-di-daerah-tertinggal.html

Canare, T. (2020). Decentralization, local government fiscal independence, and poverty: Evidence from Philippine provinces. Southeast Asian Journal of Economics, 8(2), 77–108. https://so05.tci-thaijo.org/index.php/saje/article/view/248066

Corrado, G., & Corrado, L. (2017). Inclusive finance for inclusive growth and development. Current Opinion in Environmental Sustainability, 24, 19–23. https://doi.org/10.1016/j.cosust.2017.01.013

Dartanto, T. (2015). Why is growth less inclusive in Indonesia? MPRA Paper 65136, University Library of Munich, Germany,

Dewi, I. S., & Nursiyono, J. A. (2023). Determinants of Poverty in East Java During The COVID-19 Pandemic. EkBis: Jurnal Ekonomi Dan Bisnis, 7(1), 1–11. https://doi.org/10.14421/ekbis.2023.7.1.1603

Ernawati, E., Tajuddin, T., & Nur, S. (2021). Does Government Expenditure Affect Regional Inclusive Growth? An Experience of Implementing Village Fund Policy in Indonesia. Economies, 9(4), 164. https://doi.org/10.3390/economies9040164

Farooq, S., & Ahmad, U. (2020). Economic Growth and Rural Poverty in Pakistan: A Panel Dataset Analysis. The European Journal of Development Research, 32(4), 1128–1150. https://doi.org/10.1057/s41287-020-00259-y

Gujarati, A., Cerqueira, F., & Brandenburg, B. B. (2014). Multiprocessor real-time scheduling with arbitrary processor affinities: from practice to theory. Real-Time Systems, 51(4), 440–483. https://doi.org/10.1007/s11241-014-9205-9

Hardjoko, A. T., Santoso, D. B., Suman, A., & Sakti, R. K. (2021). The Effect of Industrial Agglomeration on Economic Growth in East Java, Indonesia. The Journal of Asian Finance, Economics and Business, 8(10), 249–257. https://doi.org/10.13106/JAFEB.2021.VOL8.NO10.0249

Hassink, W., Kalb, G. R. J., & Meekes, J. (2020). The Dutch Labour Market Early on in the COVID-19 Outbreak: Regional Coronavirus Hotspots and the National Lockdown. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3702133

Herdiyati, L., & Ismail, M. (2022). Government Spending and Investment for Inclusive Growth in Indonesia: A Panel Data Analysis. Southeast Asian Journal of Economics, 10(3), 27–73. Retrieved from https://so05.tci-thaijo.org/index.php/saje/article/view/262485

Islam, Md. R., & McGillivray, M. (2020). Wealth inequality, governance and economic growth. Economic Modelling, 88, 1–13. https://doi.org/10.1016/j.econmod.2019.06.017

Kompas (2021). Sebaran 144 Kasus Kematian akibat Covid-19, Tertinggi di Jawa Timur. https://nasional.kompas.com/read/2021/09/24/18065351/sebaran-144-kasus-kematian-akibat-covid-19-tertinggi-di-jawa-timur

Kompas. (2020). 5 Provinsi dengan Kasus Kematian Covid-19 Tertinggi, Jawa Timur Nomor 1. https://www.kompas.com/tren/read/2020/09/21/130400065/5-provinsi-dengan-kasus-kematian-covid-19-tertinggi-jawa-timur-nomor-1?page=all#google_vignette

Laborde Debucquet, D., & Martin, W. (2018). Implications of the global growth slowdown for rural poverty. Agricultural Economics, 49(3), 325–338. https://doi.org/10.1111/agec.12419

Lee, N., & Sissons, P. (2016). Inclusive growth? The relationship between economic growth and poverty in British cities. Environment and Planning A: Economy and Space, 48(11), 2317–2339. https://doi.org/10.1177/0308518x16656000

Lubis, M. Z. M., & Dahraini, A. S. (2018). Analisis Intervensi Fiskal Terhadap Kemiskinan (Studi Kasus Dana Desa Pulau Kalimantan). Imara: Jurnal Riset Ekonomi Islam, 2(1). https://doi.org/10.31958/imara.v2i1.997

Manek, M., & Badrudin, R. (2017). Pengaruh Pendapatan Asli Daerah dan Dana Perimbangan terhadap Pertumbuhan Ekonomi dan Kemiskinan di Provinsi Nusa Tenggara Timur. Telaah Bisnis, 17(2). https://doi.org/10.35917/tb.v17i2.49

Meinzen-Dick, R., Quisumbing, A., Doss, C., & Theis, S. (2019). Women’s land rights as a pathway to poverty reduction: Framework and review of available evidence. Agricultural Systems, 172, 72–82. https://doi.org/10.1016/j.agsy.2017.10.009

Michálek, A., & Výbošťok, J. (2018). Economic Growth, Inequality and Poverty in the EU. Social Indicators Research, 141(2), 611–630. https://doi.org/10.1007/s11205-018-1858-7

Minas, R., Jakobsen, V., Kauppinen, T., Korpi, T., & Lorentzen, T. (2018). The governance of poverty: Welfare reform, activation policies, and social assistance benefits and caseloads in Nordic countries. Journal of European Social Policy, 28(5), 487–500. https://doi.org/10.1177/0958928717753591

Moore, J. D., & Donaldson, J. A. (2016). Human-Scale Economics: Economic Growth and Poverty Reduction in Northeastern Thailand. World Development, 85, 1–15. https://doi.org/10.1016/j.worlddev.2016.04.004

Mosley, P. (2014). The Politics of What Works for the Poor in Public Expenditure and Taxation. The Politics of Inclusive Development, 60–85. https://doi.org/10.1093/acprof:oso/9780198722564.003.0003

Murnane, R. J., & Reardon, S. F. (2018). Long-Term Trends in Private School Enrollments by Family Income. AERA Open, 4(1), 233285841775135. https://doi.org/10.1177/2332858417751355

Nansadiqa, L., Masbar, R., & Majid, M. S. A. (2019). Does Economic Growth Matter For Poverty Reduction In Indonesia? East African Scholars Journal of Economics, Business and Management, 2(2), 46–52. https://www.easpublisher.com/get-articles/550

OECD. (2015). Policies for inclusive and sustainable growth. 1246, 55–96. https://doi.org/10.1787/eco_surveys-idn-2015-5-en

Peters, D. H., Garg, A., Bloom, G., Walker, D. G., Brieger, W. R., & Hafizur Rahman, M. (2008). Poverty and Access to Health Care in Developing Countries. Annals of the New York Academy of Sciences, 1136(1), 161–171. https://doi.org/10.1196/annals.1425.011

Putra, F. (2022). Village Development Initiative as an Alternative Strategy of Rural Poverty Reduction: An Evaluation of Village Fund Program in Indonesia. International Journal of Social Science and Human Research, 5(4). https://doi.org/10.47191/ijsshr/v5-i4-35

Ranieri, R., & Ramos, R. A. (2013). Inclusive Growth: Building Up A Concept.

Ridhwan, M. M., Suryahadi, A., Rezki, J. F., & Andariesta, D. T. (2023). The impact of COVID-19 on the labour market and the role of E-commerce development in developing countries: Evidence from Indonesia. Journal of the Asia Pacific Economy, 1–44. https://doi.org/10.1080/13547860.2023.2195710

Rimawan, M., & Aryani, F. (2019). Pengaruh alokasi dana desa terhadap pertumbuhan ekonomi, indeks pembangunan manusia serta kemiskinan di Kabupaten Bima. Jurnal Ilmiah Akuntansi dan Humanika, 9(3), 287–295. https://ejournal.undiksha.ac.id/index.php/JJA/article/view/22539

Rouzet, D., Sánchez, A.C., Renault, T., & Roehn, O. (2019). Fiscal challenges and inclusive growth in ageing societies. OECD Economic Policy Papers.

Schotte, S., Danquah, M., Osei, R. D., & Sen, K. (2023). The Labour Market Impact of COVID-19 Lockdowns: Evidence from Ghana. Journal of African Economies, 32(Supplement_2), ii10–ii33. https://doi.org/10.1093/jae/ejac039

Sepulveda, C. F., & Martinez-Vazquez, J. (2011). The Consequences of Fiscal Decentralization on Poverty and Income Equality. Environment and Planning C: Government and Policy, 29(2), 321–343. https://doi.org/10.1068/c1033r

Siswantoro, S. (2022). Economic Growth versus Covid-19 Pandemic in East Java Province: Estimating The Role of Internet. Journal of Interdisciplinary Socio-Economic and Community Study, 2(2), 07–15. https://doi.org/10.21776/jiscos.02.02.02

Sudewi, N., & Wirathi, I. (2013). Pengaruh Desentralisasi Fiskal dan Pertumbuhan Ekonomi Terhadap Kemiskinan Provinsi Bali. E-Jurnal Ekonomi Pembangunan Universitas Udayana, 2(3), 135–141.. Retrieved from https://ojs.unud.ac.id/index.php/eep/article/view/4434

Sukanti, N., & Sulistyaningrum, E. (2022). Mismatch effect between education, workers, and occupations on the labor market in Indonesia. Southeast Asian Journal of Economics, 10(3), 103–133. Retrieved from https://so05.tci-thaijo.org/index.php/saje/article/view/262487

Taruno, H. T. (2019). Public Spending and Poverty Reduction in Indonesia: The Effects of Economic Growth and Public Spending on Poverty Reduction in Indonesia 2009-2018. The Indonesian Journal of Planning and Development, 4(2), 49-56. https://ejournal2.undip.ac.id/index.php/ijpd/article/view/4524

Veiga, C., Santos, M. C., Águas, P., & Santos, J. A. C. (2018). Sustainability as a key driver to address challenges. Worldwide Hospitality and Tourism Themes, 10(6), 662–673. https://doi.org/10.1108/whatt-08-2018-0054

Wibowo, E. A., & Oktivalerina, A. (2022). Analisis Dampak Kebijakan Desentralisasi Fiskal terhadap Penurunan Tingkat Kemiskinan pada Kabupaten/Kota: Studi Kasus Indonesia pada 2010 - 2018. Bappenas Working Papers, 5(1), 97–119. https://doi.org/10.47266/bwp.v5i1.117

Wolla, S. A., & Sullivan, J. (2017). Education, Income, and Wealth.

Xing, Y., Wenqing, M., & Liang, C. (2020). A methodology for improving efficiency estimation based on conditional mix-GEE models in longitudinal studies. Communications in Statistics - Simulation and Computation, 51(1), 254–265. https://doi.org/10.1080/03610918.2019.1649423

Yang, J., & Qiu, M. (2016). The impact of education on income inequality and intergenerational mobility. China Economic Review, 37, 110–125. https://doi.org/10.1016/j.chieco.2015.12.009

Young, A. O. (2019). Why Has Growth Not Trickled Down to the Poor? A Study of Nigeria. Review of European Studies, 11(1), 156. https://doi.org/10.5539/res.v11n1p156

Yusuf, A. A., & Sumner, A. (2015). Growth, Poverty, and Inequality under Jokowi. Bulletin of Indonesian Economic Studies, 51(3), 323–348. https://doi.org/10.1080/00074918.2015.1110685




DOI: https://doi.org/10.18196/jesp.v25i1.21694

Refbacks

  • There are currently no refbacks.


Copyright (c) 2024 Dyah Purwanti

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

 

Office:
Redaksi JESP UMY, Gedung E2 Lantai 2, Fakultas Ekonomi dan Bisnis, Universitas Muhammadiyah Yogyakarta
Jalan Brawijaya, Tamantirto, Kasihan, Bantul, Daerah Istimewa Yogyakarta 55183
Telp: (0274) 387656 ext.184
Fax: (0274) 387646
Email: jesp@umy.ac.id


Jurnal Ekonomi & Studi Pembangunan (JESP) is licensed under Creative Commons Attribution-ShareAlike 4.0 International.