The Role of Economic and Social Safety Nets in Extreme Poverty in Indonesia

Sugeng Setyadi; Lili Indriyani; Anita Widiastuti

doi:10.15408/etk.v24i2.38851

Authors

Sugeng Setyadi Sultan Ageng Tirtayasa University
Lili Indriyani Sultan Ageng Tirtayasa University
Anita Widiastuti Development Planning Agency at Sub-National Level, Banten Province.

DOI:

https://doi.org/10.15408/etk.v24i2.38851

Keywords:

Extreme Poverty, Convergence, System GMM, K-means Clustering

Abstract

Research Originality: This study focused on addressing the goal of reducing extreme poverty (EP) to 0% by 2024 in Indonesia, an objective that has been underexplored in global literature.

Research Objectives: This study examined convergence in EP across Indonesia and analyzed the impact of economic as well as social variables on poverty reduction.

Research Methods: Panel data from 34 Indonesian provinces (2017–2022) were analyzed using Generalized Method of Moments (GMM) and K-means Cluster analysis for regional classification.

Empirical Result: The results showed that provinces in Indonesia were reducing EP at an annual rate of 1.19%, with a half-life of 1.6 years. This process signified that the country was on a path to achieve near-zero EP by 2024. Major socioeconomic drivers identified during the study included employment expansion and investments in education. Moreover, K-means Cluster analysis identified Cluster 1 (Central Sulawesi, North Maluku, Papua) with the highest EP rate of 1.52%, showing critical geographic disparities.

Implications: The Government should adopt a multilevel strategic framework prioritizing regions with the highest poverty rates. Job creation and better access to education played a crucial role. Additionally, Indonesia's success could serve as a model for sustainable EP eradication in developing nations.

JEL Classification: I32, P46, Q01

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