Impact of economic growth, village funds, and poverty on human development in Indonesia: An analytical study from 2015 to 2022

Abstract

This study evaluates how a country's development of human resources, an important measure of economic and policy progress, is affected by various factors. It focuses on the impact of Gross Regional Domestic Product (GRDP), village funds, and poverty levels on the Human Development Index (HDI) across 33 provinces in Indonesia from 2015 to 2022. The aim is to enhance understanding of how promoting human development goes beyond just economic growth, highlighting the importance of addressing poverty and empowering local communities through measures like the Village Fund. By employing panel regression methods, including both static (POLS, FEM, and REM) and dynamic (FMOLS and DOLS) approaches, the study examines the influence of economic growth, village funds, and poverty on human development. The findings from static panel analysis indicate that while economic growth has a negative and significant effect on HDI, village funds positively and significantly influence it. As expected, poverty significantly and negatively affects HDI. Dynamic panel data confirms the positive and significant effect of village funds on HDI and, consistent with static analysis, shows poverty's negative impact. The implications of this research are threefold: First, it suggests that economic expansion might negatively affect HDI. Second, it highlights the importance of village funds in developing human resources, underscoring their role in provincial development financing strategies. Third, it recommends that provincial policymakers focus on reducing poverty to prevent it from hindering human development.