# POVERTY MACRO SYSTEM DYNAMICS MODELING BASED ON SIMULTANEOUS EQUATIONS MODELS

• Bagus Sumargo Department of Statistics, Faculty of Mathematics and Natural Science, Jakarta State University, Indonesia
• Irman Firmansyah System Dynamics Centre, IPB Complex 2, Indonesia
• Asep Anwar Nugraha System Dynamics Centre, IPB Complex 2, Indonesia
• Mulyono Mulyono Department of Computer Science, Faculty of Mathematics and Natural Science, Jakarta State University, Indonesia
• Dania Siregar Department of Statistics, Faculty of Mathematics and Natural Science, Jakarta State University, Indonesia
• Felia Aidah Nuriza Statisticians, East Belitung Central Agency of Statistics Manggar, Indonesia
Keywords: Multidimensional and complex of Poverty, Simultaneous Equation Model, System Dynamics, Prediction of The Poor

### Abstract

Poverty factors are multidimensional and complex. Currently, to predict the number of people living below the poverty line using the concept of linear thinking. It is necessary to study the causal relationships among poverty factors in form of a system dynamics model. This study aims to predict the poverty rate people in “The Golden Indonesia” 2030 using poverty macro models. The data used are time series data from 2009 to 2018 at the national level (Indonesia), and data sources from the BPS Statistics-Indonesia, and the Ministry of Environment and Forestry of the Republic of Indonesia. The research method uses a system dynamics model, where the system of thinking is created based on the two-stage least square (2SLS) simultaneous equation model. The 2SLS simultaneous equation model testing results show that there are three significant simultaneous equations, including poverty, economic growth, and human development index. Furthermore, the three simultaneous equations show a causal loop diagram (CLD) in a system dynamics model. The mean absolute percentage error (MAPE) is 2.34%, meaning that the macro poverty model is valid. The scenario formats for prediction include “optimistic” for economic growth and the “moderate” for human development index (HDI), total population, unemployment, and environmental quality index variables. The predicted percentage number of poor people in 2030 is 4.12%, a positive deviation of 0.12% from the government’s target of 4%. All parties need to work hard and together for the “optimistic” scenario to be implemented, which is to raise Indonesia’s economic growth to 7.4%. This study assumes that there is no Covid-19 problem and only predicts 10 years due to limited data used in 2010-2018. The novelty of this study is the alignment of the prediction results between the system dynamics and the simultaneous equation models. In general, the system dynamics model is valid and could answer the complexity of a phenomenon to predict poverty.

### References

Republic of Indonesia Governments, “Undang-Undang Nomor 13 tahun 2011,” 2011.

G. S. Zucker and B. Weiner, “Conservatism and Perceptions of Poverty: An Attributional Analysis,” J. Appl. Soc. Psychol., vol. 23, no. 12, pp. 925–943, 1993. https://onlinelibrary.wiley.com/doi/10.1111/j.1559-1816.1993.tb01014.x

W. J. H. van Oorschot and L. Halman, “Blame or fate, individual or social? An international comparison of popular explanations of poverty,” Eur. Soc., vol. 2, no. 1, pp. 1–28, 2000. https://www.tandfonline.com/doi/abs/10.1080/146166900360701

L. Appelbaum, “The Influence of perceived deservingness on policy decision regarding aid to the poor.,” Polit. Psychol., vol. 22, no. (3), pp. 419–442, 2001. https://onlinelibrary.wiley.com/doi/10.1111/0162-895X.00248

B. Henry, P. J,. Reyna, C. & Weiner, “Hate welfare but help the poor? How the attributional content of stereotypes explains the paradox of reaction to the destitute in America,” J. Appl. Soc. Psychol., vol. 34, no. (1), pp. 34–58, 2004. https://onlinelibrary.wiley.com/doi/10.1111/j.1559-1816.2004.tb02536.x

Y. Kim, K. Lee, Y. & Lee, “A multilevel analysis of factor related to poverty welfare states,” Soc. Indic. Res., vol. 99, pp. 391–404, 2010. https://doi.org/10.1007/s11205-010-9592-9

R. Oberman, R. Dobbs, A. Budiman, F. Thompson, and M. Rosse, “The archipelago Economy: Unleashing Indonesia’s potential,” McKinsey Glob. Inst., no. September 2012, pp. 1–116, 2012.

Bappenas, “Roadmap of SDGs Indonesia : A Hihglight,” pp. 27–36, 2019.

M. Satchi, “Technical Appendix for " Labor Markets and Productivity in Developing Countries ",” no. January, pp. 3–8, 2008.

V. Sinnathurai, “An Empirical Study on the Nexus of Poverty, GDP Growth, Dependency Ratio and Employment in Developing Countries,” J. Compet., vol. 5, no. 2, pp. 67–82, 2013. https://doi.org/10.7441/joc.2013.02.05

A. Hajiji, “Ketimpangan Pendapatan , dan Pengentasan Kemiskinan di Provinsi Riau 2002-2008,” http://repository.ipb.ac.id/handle/123456789/40851, 2010.

Wodon, “Growth, Poverty, and Inequality: A Regional Panel for Bangladesh,” https://documents1.worldbank.org/curated/en/582611468741864311/pdf/multi-page.pdf, 1999.

D. W. Siregar, H, “Dampak pertumbuhan ekonomi terhadap penurunan jumlah penduduk miskin,” 2010.

S. C. Todaro, Michael, P & Smith, Pembangunan Ekonomi, Edisi Kesebelas, Jilid I. Jakarta: Penerbit Erlangga, 2011.

A. M. Balisacan, E. M. Pernia, and A. Asra, “Revisiting growth and poverty reduction in Indonesia: What do subnational data show?,” Bull. Indones. Econ. Stud., vol. 39, no. 3, pp. 329–351, https://www.adb.org/sites/default/files/publication/28320/wp025.pdf, 2003.

B. A. Rynell, “Causes of Poverty : Findings from Recent Research,” October, no. October, https://www.issuelab.org/resources/5393/5393.pdf, 2008.

P. Cashin, C. A. Pattillo, R. Sahay, and P. Mauro, Macroeconomic Policies and Poverty Reduction: Stylized Facts and An Overview of Research, vol. 01, no. 135. https://doi.org/10.5089/9781451855708.001, 2001.

K. Gomanee, O. Morrissey, P. Mosley, and A. Verschoor, “Aid, Pro-Poor Government Spending and Welfare,” SSRN Electron. J., no. February, https://www.econstor.eu/bitstream/10419/81811/1/03-03.pdf, 2005.

W. F. Blankenau, N. B. Simpson, and M. Tomljanovich, “Public education expenditures, taxation, and growth: Linking data to theory,” Am. Econ. Rev., vol. 97, no. 2, pp. 393–397, https://doi.org/10.1257/aer.97.2.393 https://www.aeaweb.org/articles?id=10.1257/aer.97.2.393, 2007.

Sumargo,B dan Yuniarty, T “Model Persamaan Struktural Pembangunan Manusia dalam kaitannya dengan investasi sektor fisik, manusia, pendidikan, dan kesehatan di Indonesia,” MatSatt. vol. 9, no. 64, pp. 108–117, 2009.

A. R. Dariah, “Dampak Pertumbuhan Ekonomi Dan Kemiskinan Terhadap Degradasi Lingkunga Di Jawa Barat,” 2007.

J. A. Hufschmidt, M. M., James, D. E., Meister, A. D., Bower, B. T., & Dixon, “Environment, Natural Systems, and Development – An Economic Valuation Guide.,” London: The Johns Hopkins University Press, https://www.osti.gov/biblio/6702119, 1983.

B. P. et al Irawan, “Analisis Studi Evaluasi Penentuan Kriteria Rumah Tangga Miskin Tahun 2000,” in BPS, Jakarta, 2000.

N. S. Jodha, “Natural Resource Management and Poverty Alleviation in Mountain Areas: Approaches and Efforts”. International Conference Natural Asset Paper. file:///C:/Users/Asus/Downloads/CDP11.pdf, 2002.

C. Twyman, “Natural resources use and livelihoods in Botswana’s Wildlife Management areas,” Appl. Geogr., vol. 21, no. July 1997, pp. 45–68, . https://doi.org/10.1016/S0143-6228(00)00016-3, 2001.

S. Oktavilia, D. W. Puspita, and F. X. Sugiyanto, “The Relationship Between Environmental Degradation , Poverty and Human Quality in Indonesia,” E3S Web Conf. 73 , 10020 ICENIS 2018 https//doi.org/10.1051/e3sconf/201873100 20, vol. 20, pp. 4–6, https://doi.org/10.1051/e3sconf/20187310020, 2018.

H. DaĞdeviren, R. Van Der Hoeven, and J. Weeks, Redistribution does Matter: Growth and Redistribution for Poverty Reduction, no. January. https://doi.org/10.1093/0199268657.003.007, 2004.

M. Ravallion and B. Bidani, “how robust is a poverty profile?,” https://econpapers.repec.org/article/oupwbecrv/v_3a8_3ay_3a1994_3ai_3a1_3ap_3a75-102.htm, 1994.

P. P. Rogers, K. F. Jalal, and J. A. Boyd, “An Introduction to Sustainable Development,” pp. 399–401, 2008.

D. Pratomo and B. Sumargo, “Sebuah Alternatif : Better Life Index sebagai Ukuran Pembangunan Multidimensi di Indonesia An Alternative : Better Life Index as a Measure of Multidimensional Development in Indonesia Pendahuluan,” vol. 16, no. 2, pp. 123–140, https://doi.org/10.21002/jepi.v16i2.597, 2017.

R. Tamura, “Human capital and economic development,” J. Dev. Econ., vol. 79, no. 1, pp. 26–72, https://doi.org/10.1016/j.jdeveco.2004.12.003, 2006.

D. I. Stern, M. S. Common, and E. B. Barbier, “Economic growth and environmental degradation: The environmental Kuznets curve and sustainable development,” World Dev., vol. 24, no. 7, pp. 1151–1160, https://doi.org/10.1016/0305-750X(96)00032-0, 1996.

M. T. Borhan, “Promoting Environmental Stewardship through Project-Based Learning ( PBL ),” pp. 180–186, https://www.ijhssnet.com/journals/Vol._1_No._4;_April_2011/23.pdf, 2005.

H. Abou-Ali and Y. M. Abdelfattah, “Integrated paradigm for sustainable development: A panel data study,” Econ. Model., vol. 30, no. 1, pp. 334–342, https://doi.org/10.1016/j.econmod.2012.09.016, 2013.

T. Panayotou, “Economic, Growth, and The Environment,”. Paper UNECE Spring Seminar "Sustainable Development in the ECE Region" (2003 : Geneva) (DHLAUTH)638020. 2003.

B. Sumargo and E. Fadlilah, “Detection of Pseudo Economic Growth Towards Environmental Damage in Indonesia Using Error Correction Model,” in IOP Conference Series: Materials Science and Engineering, 2019, vol. 546, no. 2. https://doi.org/10.1088/1757-899X/546/2/022029, 2019

S. Kuznets, “Economic Growth and Income Inequality,” vol. 5, no. 21, pp. 1–28, https://www.jstor.org/stable/1811581, 1955.

S. K. Jha, “The Kuznets Curve: A Reassessment,” World Dev., vol. 24, no. 4, pp. 773–780, https://doi.org/10.1016/0305-750X(95)00165-9, 1996.

Bappenas, A Green Economy for a Net-Zero Future: How Indonesia can build back better after Covid-19 with the low Carbon Development Initiative (LCDI). https://lcdi-indonesia.id/wp-content/uploads/2021/10/GE-Report-English-8-Oct-lowres.pdf, 2011

T. Everett, M. Ishwaran, G. P. Ansaloni, and A. Rubin, “Economic Growth and the Environment,” no. March, . https://mpra.ub.uni-muenchen.de/23585/, 2010.

S. Bradford, “Protection and unemployment,” J. Int. Econ., vol. 69, no. 2, pp. 257–271, https://doi.org/10.1016/j.inteco.2005.06.013, 2006.

C. M. Campbell, “The effects of state and industry economic conditions on new firm entry,” J. Econ. Bus., vol. 48, no. 2, pp. 167–183, . https://doi.org/10.1016/0148-6195(96)00075-6, 1996.

M. F. Cracolici, M. Cuffaro, and P. Nijkamp, “The measurement of economic, social and environmental performance of countries: A novel approach,” Soc. Indic. Res., vol. 95, no. 2, pp. 339–356, https://doi.org/10.1007/s11205-009-9464-3, 2010.

M. Safitri, “Change without reform? Community forestry in decentralizing Indonesia,” 11th IASCP Conf. Bali, no. June, pp. 1–28, https://hdl.handle.net/1887/16242, 2006.

A. E. Clark and A. J. Oswald, “Unhappiness and Unemployment,” vol. 104, no. 424, pp. 648–659, https://doi.org/10.2307/2234639, 2013.

K. Gerlach and G. Stephan, “A paper on unhappiness and unemployment in Germany,” vol. 52, https://doi.org/10.1016/S0165-1765(96)00858-0, 1996.

B. Sumargo, F. A. Nuriza, and S. Rohmah, “The two-stage least squares simultaneous equation model for panel data on human development , economics , and environmental quality The Two-Stage Least Squares Simultaneous Equation Model for Panel Data on Human Development , Economics , and Environmental Quality,” vol. 020027, https://doi.org/10.1063/5.0041874, 2021.

S. Dewi, B. Belcher, and A. Puntodewo, “Village economic opportunity, forest dependence, and rural livelihoods in East Kalimantan, Indonesia,” World Dev., vol. 33, no. 9 SPEC. ISS., pp. 1419–1434, https://doi.org/10.1016/j.worlddev.2004.10.006, 2005.

W. Leal Filho, “Environmental careers, environmental employment and environmental training : international approaches and contexts,” no. 9, p. 199 p., 2001.

S. Mukherjee and D. Chakraborty, “Environment, Human Development and Economic Growth After Liberalisation: An Analysis of Indian States,” SSRN Electron. J., no. August 2007, https://dx.doi.org/10.2139/ssrn.1019397, 2011.

A. Fauzi, “Sinergi antara Pembangunan Ekonomi dan Pengelolaan Sumber Daya Alam dan Lingkungan,” J. Ekon. Lingkung. , vol. 13, no. 2, pp. 1–15, https://doi.org/10.29313/mimbar.v30i1.445, 2009.

B. Sumargo and K. A. P. Kasuma, “social-Environment as a Weak point of Sustainable Development in Indonesia,” in oral presentation ICGRC 2018, https://doi.org/10.1016/j.procs.2018.08.155, 2018.

H. J. Seltman, “Simple Linear Regression,” Exp. Des. Anal., 2015.

C. P. Gujarati, Damodar N and D, Basic Econometric, Fitth edit. New York: McGraw-Hill, 2008.

K. A. Pituch and J. P. Stevens, Applied Multivariate Statistics for the Social Sciences. 2016.

Sterman-Business Dynamics: Systems Thinking and Modeling for a Complex World. New York: McGraw-Hill, 2000

Firmansyah, I., Budiasa, W., Paulus, C. A., Rahman, D. A., Sukwika, T., & Hermawan, E. (2023). Modelling of Carrying Capacity at Komodo National Park: System Dynamics Approach (Case Study: Komodo Island and Padar Island, East Nusa Tenggara Province). Jurnal Pengelolaan Sumberdaya Alam dan Lingkungan (Journal of Natural Resources and Environmental Management). https://doi.org/10.29244/jpsl.13.3.492-506

Wirdaniati W, Firmansyah I, Mar’atusholikha V, Nurhajanah S. 2022. Model of Legalization of Land Certification in Rural Areas and Projection of The Value Ownership Benefits. https://doi.org/10.26532/jh.v38i2.18480

Casnan, Purnawan, Firmansyah I, Wahyuni H. 2022. Evaluation Of The Learning ProcessWith The Systems Thinking Approach. Scholaria Jurnal Pendidikan dan Kebudayaan.

Published
2024-03-01
How to Cite
[1]
B. Sumargo, I. Firmansyah, A. Nugraha, M. Mulyono, D. Siregar, and F. Nuriza, “POVERTY MACRO SYSTEM DYNAMICS MODELING BASED ON SIMULTANEOUS EQUATIONS MODELS”, BAREKENG: J. Math. & App., vol. 18, no. 1, pp. 0255-0268, Mar. 2024.
Section
Articles