The Dominant Factors in the Causes of Poverty Level in Indonesia

Abstract

Levels of poverty in many countries, including Indonesia, continuously decrease from time to time. However, the poverty is still there. Levels of poverty and its impact are always considered as a negative thing. There are many impacts of poverty, from decreased levels of future generations, increasing the dropout rate of student to an increase in crime rates. There are also many causes of poverty, from a low education level, high unemployment level, low financial aid for doing a business, to the level of human development. The level of poverty in Indonesia tends to decrease from time to time. However, it is still out of the government target. A big question is that what are the main factors for eradicating the poverty in Indonesia? This study aimed to determine the effect of education level, human development index (HDI), small business loans, unemployment, regional gross domestic product, and regional minimum wage on level of poverty. By using panel data from 2009 to 2012, in the 33 provinces in Indonesia, and by using a common, fixed, and a random effect regression methods, it can said that, statistically, all independent variables influence on poverty level. However, small business loans do not have impact on poverty level. In addition, HDI and level of education have dominant effect in reducing poverty level. This research suggests that road map of improving HDI and level of education should be made as a strategic program for Indonesia to reduce poverty level. A comprehensive research, both quantitative and qualitative should be done in each region in order to know more clearly and deeply why do people becoming and still poor.