DOES ECONOMIC GROWTH REDUCE POVERTY UNDER INCOMPLETE STRUCTURAL TRANSFORMATION? PANEL DATA EVIDENCE FROM CENTRAL JAVA, 2015-2025

Abstract

Poverty remains a major development challenge in Central Java despite sustained regional economic
growth. This study examines the effects of Gross Regional Domestic Product (GRDP), Mean Years of
Schooling (MYS), paddy productivity, and the open unemployment rate on poverty across 35 regencies
and cities in Central Java during 2015–2025. Using a balanced panel dataset of 385 observations, the
study employs a Fixed Effect Model with White cross-section robust standard errors to address
heteroskedasticity. The results indicate that GRDP has a significant negative effect on poverty,
suggesting that regional economic growth remains an important driver of poverty reduction. In
contrast, Mean Years of Schooling has a significant positive effect on poverty, indicating that
improvements in educational attainment have not been accompanied by sufficient productive
employment opportunities capable of translating human capital accumulation into welfare gains.
Meanwhile, paddy productivity and the open unemployment rate do not have a statistically significant
effect on poverty. These findings suggest that economic growth remains effective in reducing poverty
even under conditions of incomplete structural transformation. However, improvements in education,
agricultural productivity, and labor market conditions alone may not automatically generate
measurable poverty reduction without complementary structural support. This study contributes to
the literature on regional poverty by providing evidence from Central Java regarding the effectiveness
of economic growth and related socioeconomic factors in reducing poverty under conditions of
uneven structural transformation.