Do Fiscal Decentralization and Human Development Index Affect Poverty in Indonesia?

Abstract

The study aim is to analyze how the effects of fiscal decentralization and Human Development Index (HDI) on poverty in Indonesia. This study employ secondary data in the form of time series from 2010 to 2017, and cross section data consisting of 33 provinces in Indonesia, so that the type of polled data can be categorized that is a combination of time series data (for 8 years) with cross section data 33 Province in Indonesia. The analytical method used is PLS (Panel Least Square) with a comparison of two models namely the Fixed Effect and Robust Least Square models. From the results of the Fixed Effect regression model shows that DDF has a negative and insignificant effect on Poverty, while HDI has a negative and significant effect on Poverty. The study found that each additional unit of DDF reduced poverty by 10.97 percent if the HDI remains. In addition, the Human Development Index unit reduced the number of poor by 79.83 percent if the DDF remains. These findings implied that to reduce the poverty, efforts to improve HDI need to be focused. Keywords— Fiscal decentralization; Human development index; Poverty