Khairul Amri, Raja Masbar, B.S. Nazamuddin, Hasdi Aimon
Our study aims to investigate the effect of government expenditure on the poverty rate and detect the moderating role of the unemployment rate in the functional relationship between the two variables. Using a panel data set of 24 provinces in Indonesia during 2005-2018, we use the dynamic model of the Generalized Methods of Moment to estimate the functional relationships. Our findings discovered that government expenditure on goods, services, and capital significantly reduces poverty. Conversely, grant and social aid expenditures have a positive and significant effect. The unemployment rate substantially increases the poverty rate and moderates the impact of the three types of public spending on the poverty rate. The higher the unemployment rate, the smaller the poverty reduction effect of government expenditure. These findings imply that the government budgetary allocation for a particular spending component should consider the unemployment rate as the primary consideration. It is due to the effectiveness of each expenditure group in reducing poverty differing at the various levels of the unemployment rate. © 2024, Bulgarska Akademiya na Naukite. All rights reserved.
Faculty of Islamic Economics and Business, Universitas Islam Negeri Ar-Raniry, Indonesia; Faculty of Economics and Business, Universitas Syiah Kuala, Banda Aceh, Indonesia; Faculty of Economics and Business, Universitas Negeri Padang, Indonesia
