The Determinants of Poverty: Case of Indonesia

Abstract

Objective - The objectives of the study were to analyze the general picture of poverty, and determinants of poverty in Indonesia. Understanding poverty characteristic is a main point for designing an effective poverty reduction strategy. During the last five years Indonesia has experienced a slowing down growth and the poverty rates has declined slightly. Some provinces or regions have managed to reduce the poverty well, while others have been slower, and also the distribution of the poor is uneven across both rural and urban, generally the rural is more than urban area. Methodology/Technique - Factors determining poverty of households were estimated and anayzed using a logit regression model, and it is found that such demographic factors as gender and age of households head, size of households, factors of production included accessibility to the technology and credit, working status, and education attainment, and also geographic characteristics significantly explain reasons for being poor. Moreover, increasing for accessibility of households to the technology and credit, reducing the size of households, and increasing an education attainment especially in rural area are important to do as a government priority intervention. Findings - The results of the determinants of poverty in Indonesia shows that poor households are those with large number of dependents and equipped with limited education access, and the majority of these households live in rural area. Novelty - Study suggests that increasing for accessibility of households to the technology and credit, reducing the size of households, and increasing an education attainment especially in rural area are important to do as a government priority intervention or policy implications. Type of Paper: Empirical Keywords: Logit Regression; Poverty Reduction, Indonesia. JEL Classification: I21, I22, I24.