The Impact of Local Governments’ Social Transfers on Poverty Reduction In Indonesia

Bayu Kharisma, Sutyastie S. Remi, Muhammad Syaiful, Ricky Abdillah




This research aims to examine the impact of intervention to poverty reduction, manifested through social transfers from local governments’ budget (APBD). We use provincial panel data to examine the extent of impact from such transfer to poverty alleviation performance. Using Beck and Katz’s OLS-PCSE estimator, we confirmed that higher amount of social transfer is indeed beneficial for further reduction in poverty incidence. Other explanatory variables, namely GDP per capita and human capital, also demonstrate significant effects in decreasing the number of poor people, while higher unemployment can lead to addition of the number of people living below the poverty line. These findings suggest that the declining trend in social transfers channelled by local governments might underlie the stagnation of poverty reduction in the last decades. We therefore suggest that ensuring the sustainability of transfers to the poor from local governments’ funds is very important to re-accelerate poverty reduction.

Keywords: social transfer; local government; poverty reduction; OLS-PCSE estimator

Kata Kunci

social transfer; local government; poverty reduction; OLS-PCSE estimator.

Teks Lengkap:

PDF (English)



Beck, N., & Katz, J. N. (1995). What to do (and not to do) with Time-Series Cross-Section Data. The American Political Science Review, 89(3), 634–647.

Becker, G. S. (1995). Human Capital and Poverty Alleviation. Journal of Human Resources Development and Operations Policy, (March), 24.

Booth, A., Purnagunawan, R. M., & Satriawan, E. (2019). Towards a Healthy Indonesia? Bulletin of Indonesian Economic Studies, 55(2), 133–155.

Caminada, K., Goudswaard, K., & Koster, F. (2012). Social income transfers and poverty: A cross-country analysis for OECD countries. International Journal of Social Welfare, 21(2), 115–126.

De Hoyos, R. E., & Sarafidis, V. (2006). Testing for cross-sectional dependence in panel-data models. Stata Journal, 6(4), 482–496.

Drukker, D. M. (2003). Testing for Serial Correlation in Linear Panel-data Models. The Stata Journal: Promoting Communications on Statistics and Stata, 3(2), 168–177.

Fan, S., Hazeli, P., & Thorat, S. K. (1994). Impact of Public Expenditure On Poverty in Rural India. Economic and Political Weekly, 35(November), 240–246.

Gujarati, D. N., & Porter, D. C. (2009). Basic Econometrics (5th ed.). New York: McGraw-Hill Irwin.

Gundlach, E. (1997). Human Capital and Economic Development : A Macroeconomic Assessment. Intereconomics, 61(February), 23–35.

Kakwani, N. (2000). Growth and Poverty Reduction: An Empirical Analysis. Asian Development Review, 18(2), 74–84. Retrieved from

Kanbur, R. (2005). Growth, Inequality and Poverty: Some Hard Questions. Journal of International Affairs, 58(2), 223–232. Retrieved from

Mehmood, Rashid; Sadiq, S. (2010). The Relationship Between Government Expenditure and Poverty: A Cointegration Analysis. Romanian Journal of Fiscal Policy, 1(1), 29–37.

Miranti, R. (2007). The Determinants of Regional Poverty in Indonesia, 1984 - 2002. The Australian National University.

Obi, B. (2007). Fiscal Policy and Poverty Alleviation : Some Policy Options for Nigeria. Research Papers, (February).

Osinubi, T. S. (2005). Macroeconometric Analysis of Growth, Unemployment, and Poverty in Nigeria. Pakistan Economic and Social Review, XLIII(2), 249–269. Retrieved from

Tilak, J. B. G. (2002). Education and Poverty. Journal of Human Development, 3(2), 191–207.

Xue, J., & Zhong, W. (2006). Unemployment, poverty and income disparity in urban China. Unemployment Inequality and Poverty in Urban China, (1999), 43–64.


ISSN: 2549-8932

 dipublikasikan oleh LPPM Universitas Bina Sarana Informatika Jakarta

Jl. Kramat Raya No.98, Kwitang, Kec. Senen, Kota Jakarta Pusat, DKI Jakarta 10450
Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License