Abstract
This paper examines the factors driving poverty dynamics in Indonesia for the period 2014-2023 across 34 provinces, using a balanced panel model. The outcomes reveal high levels of poverty perpetuation, and that past deprivation has a significant impact on present levels of poverty. An increase in population over a short period contributes to poverty when employment and human capital development are low. Improvements in education always decrease poverty, while increases in unemployment lead to poverty growth. With endogeneity controlled using valid instruments (lagged investment terms and a novel instrumental approach: interactions between industry-education and industry-electricity), economic growth was found to have a positive, significant impact. This implies that the recent capital-intensive growth, without structural transformation, has been neither inclusive nor sustainable; it exacerbates poverty by increasing inequality, displacing urban labor, and driving inflation. Government spending and private-sector investment both help reduce poverty, but this depends on fiscal restraint and sectoral allocation. Poverty reduction is linked to industrial development, and in this case, the importance of attracting industry is highlighted. The paper suggests coordinated policies that combine demographic management with specific fiscal reforms and structural change towards labor-intensive growth, with investments in education and effective public expenditure.