Does Government Quality Spending can reduce Poverty? A Case in East Java Province

Objective – The poverty issue in East Java Province is an interesting research object. This phenomenon has retrieved in every fiscal year, although the intergovernmental transfer funds increase significantly annually. In the decentralization era, a region has been authorized to identify its problem and provide solutions based on their initiatives and preferences. The local government through their budget should focus on their problem solving, i.e. poverty alleviation. Utilizing panel regression, we found that government spending on education and health can reduce poverty rate. Methodology/Technique – OLS (Ordinary Least Squared) model was utilized to answer the objective of the study, that is, to see how the effect of government spending in various sectors on poverty alleviation. Findings – Using the panel regression model, this study found that government spending on education has a negative impact on poverty rate in the East Java Province. The impact on this variable appears to be statistically significant. Novelty – This study showed that central and local government should synchronize their proposed programs, reducing overlapped programs, to pursue a higher efficiency of budget management. Type of Paper: Empirical/Review.