August 13, 2025

The Effect of Local Government Expenditure on Poverty in Central Java

Key Points

Government expenditure in housing and the economic sector reduces poverty significantly but with complexities.
Findings indicate a noteworthy negative effect on poverty from specific expenditures, suggesting targeted interventions may be needed.
Analysis utilized a fixed effect panel data regression model focusing on multiple sectors from 2019 to 2023.
These findings highlight the need for effective budget policies in Central Java to better combat persistent poverty.

Abstract

Government expenditure in regencies and cities across Central Java Province has generally shown an increasing trend. However, there are still regions within the province where high levels of government expenditure coexist with high poverty rates. This study aims to examine the effect of government expenditure in the sectors of education, health, housing and public facilities, economic, and social protection on poverty in the regencies and cities of Central Java Province from 2019 to 2023 using panel data regression. As model was chosen for the analysis, the results of Fixed Effect Model (FEM) show that government expenditures in the housing and public facilities sector and the economic sector has a negative effect on poverty. On the other hand, government expenditure in the social protection has a positive effect on poverty. Meanwhile, government expenditures in the education and health does not have a significant effect on poverty in the regencies and cities of Central Java Province. It is recommended that the government formulate more effective and well targeted budget policies to reduce poverty in the region.

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