REPOSITORY

An increase in economic growth is not always accompanied by a decrease in the poverty
rate, this depends on the level of income distribution of a country or region. This paper
analyzes the relationship of FDI to poverty by involving its interaction with economic
growth and income inequality simultaneously. This study used two models, namely
multiple regression and moderation regression models. This model includes several other
explanatory variables, namely domestic investment, economic openness, average length
of schooling and the workforce. Moderate Regression analyzes economic growth and the
interaction between economic growth and income inequality and poverty. The regression
model is a cross section of provinces in Indonesia for the 2012 and 2016 periods. The
results showed that FDI had a significant positive effect on economic growth. Economic
growth is estimated to have a significant effect on poverty alleviation. And the interaction
between economic growth and income inequality has a significantly stronger effect on
poverty reduction. The results showed consistency between 2012 and 2016. The most
important conclusion from this study is that economic growth coupled with a reduction
in income inequality will reduce poverty more significantly.

• How Does Foreign Direct Investment (FDI) Reduce Poverty? Application of the Triangular Hypothesis for the Indonesian Case
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