Non-food consumption and regional poverty reduction: A pathway to inclusive regional welfare

Despite Indonesia’s sustained economic growth, the pace of poverty reduction has slowed, revealing a gap between macroeconomic expansion and household welfare improvements. Addressing this disconnect requires shifting the focus of poverty analysis from income or asset accumulation toward household consumption patterns, particularly non-food expenditure that reflects long-term capability building. This study investigates the role of non-food consumption in reducing poverty and improving household welfare in East Java, Indonesia. Using district-level panel data for 2010–2024 and Susenas 2024 microdata, the study applies a Common Effect Model for the regional analysis and an OLS-based household consumption model with interaction terms. The results show that non-food consumption reduces poverty more strongly than investment, while education, health, and housing quality strengthen the effect of income on non-food spending. These findings highlight non-food consumption as both a reflection and a driver of inclusive growth.