The Influence of Unemployment and Poverty on Economic Growth in Pidie Regency

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FORMOSA NEWS - Medan - Delayed Economic Ripple: How Unemployment and Poverty Impact Growth in Pidie Regency over Time. Unemployment and poverty do not immediately drag down regional economic output; instead, their dynamic effects unfold over multi-period delays. This conclusion comes from a quantitative econometric study conducted by Levi Rahmalia, Ayu Angelina Pasaribu, Siti Maisyarah, and Yosie Gabriela Panjaitan from Universitas Senior Medan. Published in August 2026 in the Formosa Journal of Applied Sciences, the research highlights why conventional short-term economic policies often fail to capture the true structural impact of labor market and social welfare challenges in regional economies.

Social and Economic Relevance

Regional administrative divisions frequently struggle to balance welfare intervention with sustainable expansion. In Pidie Regency, a region within Aceh Province, policymakers face persistent challenges regarding human resource utilization and community welfare. Traditional economic modeling often assumes immediate linear relationships between social metrics such as joblessness or low household income and local Gross Regional Domestic Product (GRDP). However, regional economies operate within dynamic adjustment timelines. Understanding the precise time lag required for labor underutilization and poverty to affect regional output is critical for designing effective public spending, vocational programs, and development initiatives.

Research Methodology
To capture these dynamic interactions, the researchers analyzed secondary quarterly time-series data from Pidie Regency spanning from 2007 through 2025. The data was collected through official archival and statistical documentation from sources such as Statistics Indonesia (BPS). The authors applied a Vector Autoregression (VAR) framework using EViews software to model the relationships among three key variables: regional economic growth, unemployment, and poverty. The analytical pipeline included:

• Stationarity Testing: Using the Phillips-Perron test at first difference to eliminate unit root issues.
  
• Lag Selection: Identifying an optimal five-period lag using criteria such as Akaike Information Criterion (AIC) and Final Prediction Error (FPE).
  
• Stability and Cointegration Checks: Confirming VAR model stability via modulus criteria and establishing non-cointegration via Johansen tests.
  
• Granger Causality & Dynamic Analyses: Executing Granger causality tests, Impulse Response Functions (IRF), and Variance Decomposition (VD) across a 76-period horizon.
  

Key Research Findings
The empirical results reveal that regional economic performance in Pidie Regency is heavily driven by its own historical path and time-delayed responses to social challenges:

• Direct vs. Time-Lagged Effects: Granger causality tests showed no direct, simultaneous causal dependence between variables, proving that shocks take time to reverberate through the economy.
  
• Economic Growth Self-Reliance: Past economic growth significantly dictates present growth. VAR estimations indicate positive and significant impacts from the first and fifth lags of economic growth, though the fourth lag shows a significant negative adjustment.
  
• Unemployment Dynamics: Joblessness shows no significant effect during lags 1 through 3. However, unemployment exhibits a positive, statistically significant impact at lag 4 before turning negative and significant at lag 5.
  
• Poverty Dynamics: Similar to unemployment, poverty does not influence economic growth in the immediate lags (lags 1–3). However, at lags 4 and 5, poverty demonstrates a statistically significant positive effect on economic growth.
  
• Long-Term Contribution (Variance Decomposition): Variance Decomposition reveals that over a 76-period horizon, economic growth explains approximately 86.92% of its own variation. Poverty fluctuations account for roughly 8.45% of the variance in economic growth, while unemployment fluctuations contribute about 4.63%.
  
• Impulse Response Insights: Impulse Response Function (IRF) graphs show that economic growth responses to unemployment and poverty shocks display initial fluctuations before gradually stabilizing toward equilibrium over extended periods.
  

Real-World Impact and Policy Implications
The study provides actionable guidance for regional planners, business leaders, and government officials:

• Long-Term Policy Planning: Short-term economic evaluations may misinterpret the structural health of a region. Local governments must structure welfare policies with multi-year transition periods in mind.
  
• Targeted Workforce Investment: Addressing joblessness requires investments in vocational education and targeted skills training to shorten the structural lag between labor supply and productive output.
  
• Community Empowerment: Programs targeting poverty reduction should focus on productive economic engagement, improving access to technology, health, and education to boost long-term regional productivity.

Author Profiles
Levi Rahmalia, S.E., M.Si. – Lecturer and researcher at Universitas Senior Medan, specializing in regional economics and quantitative macroeconomic analysis.
Ayu Angelina Pasaribu, S.E., M.Si. – Faculty member at Universitas Senior Medan with research expertise in labor economics, public finance, and human capital development.
Siti Maisyarah, S.E., M.Si. – Researcher at Universitas Senior Medan focusing on applied econometrics and socio-economic policy.
Yosie Gabriela Panjaitan, S.E., M.Si. – Academic at Universitas Senior Medan specializing in developmental economics and regional growth modeling.

Source
Levi Rahmalia, Ayu Angelina Pasaribu, Siti Maisyarah, Yosie Gabriela Panjaitan. The Influence of Unemployment and Poverty on Economic Growth in Pidie Regency (Pengaruh Pengangguran dan Kemiskinan terhadap Pertumbuhan Ekonomi di Kabupaten Pidie). Formosa Journal of Applied Sciences (FJAS). Vol. 5, No. 8, hlm. 1681–1696
DOI: https://doi.org/10.55927/fjas.v5i8.93
URL: https://journalfjas.my.id/index.php/fjas