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Modeling of Poverty Determinants in Sumatera Island (Panel Regression Approach)

Author

Listed:
  • Muhammad, Fajar
  • Zelani, Nurfalah
  • Septiarida, Nonalisa

Abstract

This paper examines to determine whether there is an effect of the human development index (HDI), the open unemployment rate, economic growth, and regional GRDP per capita on poverty levels in Sumatera Island. In general, the trend of the poverty rate by the province in Sumatera decreased during 2010-2019 period, however, there are five provinces which on average have a poverty rate above 11 percent (above the national average poverty rate), namely Aceh, Bengkulu, Lampung, South Sumatera, and North Sumatera. This study used a dynamic panel approach with the Random Effect Model (REM). The data source was obtained from Statistics Indonesia (BPS) for the period 2010-2019. The results showed that the HDI variables and economic growth had a negative and significant effect on poverty levels in Sumatera Island. Meanwhile, the variables of the open unemployment rate and regional GDP per capita have a negative and insignificant effect on poverty levels in Sumatera Island. Simultaneously, it is concluded that the independent variables overall affect the poverty level. The coefficient of determination is 65.6370 percent, which means that variations in the level of poverty can be explained by the independent variables by 65.6370 percent and the remaining 34.3630 percent is explained by other factors out of the model.

Suggested Citation

  • Muhammad, Fajar & Zelani, Nurfalah & Septiarida, Nonalisa, 2020. "Modeling of Poverty Determinants in Sumatera Island (Panel Regression Approach)," MPRA Paper 105876, University Library of Munich, Germany, revised 14 Dec 2020.
    • Handle: RePEc:pra:mprapa:105876
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    References listed on IDEAS

    as
    1. Chinasa Ikelu & Onyukwu E. Onyukwu, 2016. "Dynamics and Determinants of Poverty in Nigeria: Evidence from a Panel Survey," Economic Studies in Inequality, Social Exclusion, and Well-Being, in: Almas Heshmati (ed.), Poverty and Well-Being in East Africa, chapter 0, pages 89-116, Springer.
    2. T. S. Breusch & A. R. Pagan, 1980. "The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 239-253.
    3. Edmore Mahembe & Nicholas M. Odhiambo, 2020. "Development aid and its impact on poverty reduction in developing countries," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 19(2), pages 145-168, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Determinant; Model; Poverty; Sumatera;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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