New Financing for Social Security Program and the Study of Regional Productivity Growth, Poverty Reduction, and Income Inequality: Evidence from Peripheral and Poor Provinces in Indonesia

Abstraksi

A prolonged perspective that economic growth is a prerequisite for poverty reduction. According to the World Bank (2006), the countries which had historically experienced the greatest reduction in poverty were those that had experienced long-standing periods of sustained economic growth. Besides, several recent studies have also found that the higher is income inequality within a country, the more limited is the impact of growth on reducing poverty. Thus, economic growth associated with progressive and redistributive policies will reduce poverty more than the growth that leaves the distribution unchanged. For these days, Government of Indonesia is more focus only on short-term efforts of reducing poverty such as by giving cash transfer and subsidized rice for poor households. Due to the less concerned about the importance of productivity being a key driver of economic growth for poverty reduction and improvement in living standards, it is important to explore the link between productivity and poverty, which generally overlooked the role of income distribution. Moreover, the establishment of new source of fund in addition to state budget, which will potentially form integrated funding scheme, is undeniable to support the improvement of social security programs. This study employs Panel Data Regression Model to conduct comparative regional analysis by using Indonesia’s cross selected provincial data. This study is expected to provide inputs on improving on poverty and inequality reduction policy as well as finding a new source of fund for social security program in Indonesia.