Arius Jonnadi, Syamsul Amar, Hasdi Aimon



Economic growth and poverty is an important indicator to see the success
of a country's development. This study aims to determine and analyze the two-way
influence   between   economic   growth   and   poverty   in   Indonesia:   (1)   The   effect   of
unemployment,        poverty,   investments      and   economic     growth.     (2)  The   effect   of
investment,     life  expectancy,     literacy,   and   length   of  education,     and   economic
growth   on   poverty.This   study   uses   panel   data   or   pooled   time-series   crossection
using time series data from the years 2005-2009, and the crossection is that there
are 33 provinces in   Indonesia. The method used is descriptive and econometric
analysis     using   a   model    of   simultaneous      equations     (simultaneous      equations
models)   with   two-stage   least   squares   method   (Two-Stage   Least   Square   2SLS)
using Indirect Least Square (ILS).
The   results   showed   that   there   is   a   two-way   interplay   between   economic
growth and poverty. Significant effect on economic growth in poverty reduction,
especially   in   rural   areas    there   are   many   pockets    of  poverty.   the   opposite   of
poverty is also a significant effect on economic growth. Through improved access
to capital, quality of education (literacy and increased length of education) and
health (increased life   expectancy) of the poor can increase their productivity in
the attempt during the period 2000-2009. The unemployment rate, and significant
investment      on   economic     growth.     Furthermore,      investments     in   domestic    and
foreign investments,  life expectancy, literacy and school longer a significant effect
on the number of poor.
Based     on  these   findings    the  policy   the  government      should    do   is  spur
economic   growth   through   the   expansion   of   investment   especially   in   agriculture
(agribusiness      and    agro-industries)     in  rural    areas   where     many    poor    people
depend.   Recommended   to   the   government   in   order   to   spur   economic   growth   in
urban areas in order to prioritize employment in which informal sector in general
the   poor   do   business.    Whereas     in  rural   areas   run  projects    that  are   capital -
intensive    investment     to  open    up   employment      opportunities,     especially    in  the
agricultural sector. Furthermore, it also advised the government both at central
and   regional   levels   through   the   state   budget   and   regional   budgets   in   order   to
further enhance the percentage of budget allocation on health and education to
improve   the   quality   of   human   resources   of   Indonesia's   population.   In   order   to
improve      the   quality   of   human     resources     in   Indonesia     suggested     that   the
government should also  continue to run the program compulsory 9 (nine) years,
and scholarships for children from poor families to achieve to improve the quality
of their children.
Keyword: Economic growth, poverty, unemployment, and investments

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