The Effectiveness of Government Policies in Reducing Poverty and Income Inequality in Indonesia: An Empirical Study Using the PSM Method

Authors

  • Didi Nuryadin UPN Veteran Yogyakarta
  • Didit Welly Udjianto UPN Veteran Yogyakarta
  • Gita Astyka Rahmada UPN Veteran Yogyakarta
  • Bulan Lestari Yasinta Simatupang UPN Veteran Yogyakarta
  • Anggun Devinta Dharmawan UPN Veteran Yogyakarta

DOI:

https://doi.org/10.31098/bmss.v5i2.1050

Keywords:

Income Inequality, Poverty, Propensity Score Matching

Abstract

Despite economic growth, Indonesia faces ongoing poverty and inequality issues. Social assistance programs have been implemented, but there is limited evidence of their long-term effectiveness. This study assesses the impact of these programs on four household outcomes related to sustainable income: Training Accessibility, SMSE Accessibility, Information Accessibility, and Financial Inclusion. Using propensity score matching with the SUSENAS 2022 data, the research estimates the effects through logistic regression based on pre-treatment factors, including demographics, assets, and infrastructure. Kernel matching calculates the Average Treatment Effect on the Treated (ATT), tested across urban and rural groups. Findings indicate a positive relationship between social programs and SMSE Accessibility (ATT = +0.025, p < 0.01), thereby enhancing small enterprise and market access. No effects are found on Training and Information Accessibility, indicating pre-existing differences rather than program impacts. Surprisingly, a negative effect is observed for Financial Inclusion (ATT = -0.053, p < 0.01), where treated households exhibit lower formal financial inclusion, suggesting that further investigation is warranted. These findings offer critical insights for policymakers: while current social assistance programs effectively enhance micro-enterprise development, they should be complemented with targeted financial literacy initiatives and improved access to formal banking services to maximize long-term poverty reduction and economic empowerment outcomes.

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Published

2025-10-14

How to Cite

Nuryadin, D., Udjianto, D. W., Rahmada, G. A., Simatupang, B. L. Y., & Dharmawan, A. D. (2025). The Effectiveness of Government Policies in Reducing Poverty and Income Inequality in Indonesia: An Empirical Study Using the PSM Method. RSF Conference Series: Business, Management and Social Sciences, 5(2), 490–499. https://doi.org/10.31098/bmss.v5i2.1050

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Articles