Abstract

Economic growth in Sumatra Island plunged at an annual rate of 2.21 percent in 2020, but recovered sharply at the rate of 4.56 percent in 2021 due to the outbreak of COVID-19 pandemic. While economic growth is now comfortably on a par with pre-pandemic levels, the consequence of the pandemic was a rapid increase in poverty that was shown by the rise of the head count index by 4 percent in 2020. Along with the rise of economic growth in 2021, the proportion of poor people in Sumatra Island was also reduced in general, but not in all of the cities. It means that some cities have more pro-poor growth than other cities. By using cross-city analysis, this study aims to determine under which conditions growth can be considered as pro-poor in Sumatra Island. This degree of pro-poor growth is measured by poverty equivalent growth rate (PEGR) that was calculated using raw data of Total Household Consumption from National Socio-Economic Survey. We use panel data of 154 cities in Sumatra Island over the period 2019-2021. This study can contribute to evaluating the pro-poorness of government policies in several factors. To identify the effect of labor market, local government budget, inequality of expenditure, and agricultural sector on pro-poor growth, we apply panel logistic regression. The cross-city evidence suggests that there is a variation in poverty reduction for the same growth rate in Sumatra Island. Agricultural sector is the most significant tool that affect the pro-poor growth due to the highest contribution of Sumatra Island to Indonesia in this sector. Surprisingly, the local government budget does not affect the pro-poor growth. Furthermore, there needs to be a deeper evaluation on the use of the government budget, so that the poor can feel the benefits of it.