THE GROWTH OF AGRICULTURAL SECTOR AND POVERTY REDUCTION IN INDONESIA

There is ample empirical evidence that a robust agricultural sector is crucial for both economic growth and poverty reduction. In Indonesia, despite its substantial role in employment, it often fails to provide a decent income for its workers. This study aims to identify the role of the agricultural sector in poverty reduction in Indonesia. The research methods used is panel data regression with time series data from 2011-2024 and cross-sectional data from 34 provinces in Indonesia. The dependent variables are total GRDP, GRDP in agriculture, manufacture, and service, while the independent variables are the change in the number of poor people for three locations: total of rural and urban, rural, and urban. The results show that general economic growth is effective in reducing total and rural poverty. Growth in the agricultural sector appears to be associated with an increase in total and rural poverty. Both manufacturing and services GRDP growth are linked to an increase in urban poverty. Growth in services and manufacturing, despite some negative effects on urban poverty, shows a positive impact on rural poverty. This research provides evidence that economic growth alone, particularly in agriculture, is not inherently pro-poor. This is a critical finding that warrants further investigation. It could point to issues like uneven distribution of benefits from agricultural growth, displacement of labor, or increasing inequality within the rural agricultural sector. Policies must be specifically designed to ensure that the benefits of growth are inclusively distributed and directly address the vulnerabilities of poor households.