DETERMINANTS OF POVERTY ON THE ISLAND OF JAVA 2011-2025

Abstract

Poverty is a structural challenge in regional development; although Java is the center of national economic growth, disparities in poverty rates across regions persist, indicating the need for a comprehensive identification of determining factors. This study aims to analyze the effects of social assistance spending, per capita GRDP, open unemployment rate, average years of schooling, and the industrial sector on poverty rates in Java during the 2011–2025 period. A quantitative approach using panel data from six provinces was employed to measure causal relationships among variables. Panel data regression analysis was conducted by selecting the best model through the Chow and Hausman tests, leading to the application of the Fixed Effects Model. The results indicate that social assistance spending has a positive effect on poverty, suggesting that increased social assistance has not yet optimally reduced poverty. Conversely, per capita GRDP, average years of schooling, and the contribution of the industrial sector have a significant negative effect on poverty levels, indicating that economic growth, improved educational quality, and industrial sector development play a role in reducing poverty. The open unemployment rate has a negative but insignificant effect, reflecting the role of the informal sector in the labor market structure. GRDP per capita is the most dominant variable, underscoring the importance of inclusive economic growth that is job-creation-oriented.