Efficiency Comparison of Pro-Growth Poverty Reduction Spending before and during the COVID-19 Pandemic: A Study of Regional Governments in Indonesia

Abstract

During the COVID-19 pandemic, all regions in Indonesia have had negative economic growth. It also increased the poverty rate in the country. The government must allocate pro-growth and poverty reduction programs to maintain economic growth and simultaneously reduce poverty. This study aims to measure the relative efficiency of pro-growth poverty reduction spending of local governments in seven regions in Indonesia. This study compares the efficiency scores before and during the COVID-19 pandemic from 2015 to 2019 and 2020. The inputs are five types of government spending: education, health, economic, social protection, and infrastructure. The outputs are economic growth and poverty reduction. Data envelopment analysis with an output-oriented model and a return to scale variable approach is applied. The results show that the highest average local government efficiency score was in Kalimantan, with the lowest being in Sulawesi. The efficiency scores of local governments in the COVID-19 pandemic differ between regions: it remained stable in Kalimantan, increased in Java-Bali, Sumatra, and Sulawesi, and experienced a decline in Nusa Tenggara, Maluku, and Papua. The study concludes that economic growth and poverty reduction can simultaneously measure government efficiency. To be relatively efficient, local governments need to consider allocating pro-growth poverty reduction spending to improve the conditions of both outputs.