Economic Growth, Poverty, Unemployment, and the Human Development Index (HDI) in Mitigating Socio-economic Disparities in North Sumatra (2019-2023): An Econometric Case Study

Abstract

This study investigates the impact of economic growth, poverty, unemployment, and the Human Development Index (HDI) on income inequality in North Sumatra during 2019–2023. Using panel data regression with the Fixed Effect Model (FEM), selected for its ability to control unobserved district-specific factors, the study identifies significant relationships. Poverty and unemployment show a positive and significant effect on income inequality, indicating that higher poverty and unemployment levels exacerbate disparities in income distribution. In contrast, HDI has a significant negative effect, demonstrating that improvements in education, healthcare, and living standards mitigate inequality. Interestingly, economic growth does not significantly affect income inequality, challenging conventional assumptions about its equitable benefits. The findings suggest that growth alone cannot ensure equity without targeted interventions. The study recommends enhancing HDI through education reforms, improved healthcare systems, and social welfare initiatives. Additionally, efforts to alleviate poverty and reduce unemployment, such as job creation, skills training, and MSME development, are essential for achieving inclusive economic growth. By addressing these structural inequalities, policymakers can foster a more equitable income distribution across districts. This research offers theoretical insights into inequality determinants and practical guidance for regional development, filling a gap in understanding how socio-economic factors and human capital interact to influence income disparities.