Spatial Spillover Impact of Sectoral Government Expenditure on Poverty Alleviation in South Kalimantan Province

Abstract

Poverty is still one of the forefront issues in developing countries. It could hamper the achievement of
sustainable development goals, thereby triggering a recurring call on the government's role in mitigating
poverty. This paper contributed to the debate on the role of sectoral government spending under the
fiscal decentralization policy to combat poverty. Using a case study in South Kalimantan Province, we
employed a spatial panel data analysis covering 13 districts from 2010-2020. This study investigated the
presence of spatial dependency on poverty and the spatial spillover impact of government expenditure—
education, health, housing, public facilities, and social protection—on poverty. The research found the
existence of spatial autocorrelation on poverty and the significant high-cluster poverty in the agriculture-
based region. The direct estimation from the Spatial Durbin Model uncovered that government
expenditure on education, health, and social protection significantly alleviated poverty, while housing and
public facilities expenditure remained insignificant in reducing the poverty rate. Besides, education
spending also has a significant indirect effect on poverty, indicating the spatial spillover impact of
education spending by the neighbors on poverty in a region.

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