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

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.