Evaluation of the Capacity of Rural Communities in Indonesia to Improve the Economic Welfare

Abstract

Purpose: This study evaluates the ability to improve the economic welfare of rural communities in Indonesia by using the inequality measures of the distribution of information between leaders and their people as a variable that weakens the capacity of increasing the welfare. Research Design, Data, and Methodology: The research designed by developing an instrument using data validity and reliability testing. Before, primary data collected through interviews, questionnaires, observation, and documentation on the selected respondents. Then, the research method used is mixed methods research, in which quantitative and qualitative methods combined. Result: The finding from this study is that there is an inequality measure in the form of a high gap between the score of information distribution obtained by the village government compared to the score of the community, which has led to the welfare of the village which is still at a moderate level and not ready to become a prosperous society. Conclusion: The weakness of the village community is related to two things, namely the behavior and knowledge of the community about the issues, so the implication is that there must be a strong effort from the central government to ensure that technology is more evenly distributed to all villagers.

1. Introduction¹²

The Indonesian case suggests that the Indonesian welfare system modified on three occasions, stimulated by economic growth, global market pressures and the universalization of social policy (Sumarto, 2017). Then, this study will specifically examine the effect of the universalization of social policies on the improvement of the welfare of rural communities in Indonesia, those related to the inequality measure of the information distribution between government and society. To reach the desired target, we choose a location whose economic welfare was within the borders between the good and the best groups, where the variable that causes it presumed due to the inequality measure of information distribution.

Then, this study chooses to examine a village, namely the smallest group of locations and communities where they have the authority to regulate its own household affairs in accordance with social conditions and local customs and is no considered implements who only carry-out the policies which made by the central government.

The target of this study is to examine the impact of the gap of information distribution on the economic welfare of the people living in a location, especially in rural areas in Indonesia, using the level of inequality measure as a variable that weakens this effect. Previously, primary data collected through interviews, questionnaires, observations, and documentation on the selected respondents. Then, to achieve the accuracy and thoroughness of the study results, the research designed to build an instrument using data validity testing. Then, for the results of the study to justified, it chosen to use the mixed methods research, in which quantitative and qualitative methods combined.

Welfare economics is a branch of economics that uses microeconomic techniques to evaluate well-being at the aggregate level that thinks about ways and techniques to optimize the economic sector with the aim of achieving public welfare using economic policy instruments (Kozlovskyi et al., 2020). Then, it is important for us to look for new ways so that economic welfare can still improve, even though economic growth does not increase (Walker et al., 2021).

Information distribution is the process of delivering information, which done in the few steps (Choi et al., 2017). Initially the information conveyed to a limited number of recipients, which will disseminate simultaneously to a much larger of recipients. But a poor information distribution in a society opened new avenues for determining the network structures shape the spread of negative memories, which eventually lead to collective memory, and individuals have an emotional tendency to share information that prominent (Berger, 2011). And collective memory defined as an overlapping item that remembered by all members of an individual group (Congleton & Rajaram, 2014).

Inequality measure can happen anywhere, while the government has the duty to ensure the people have political freedom, and political equality is one of the objectives of the constitution of democratic countries. However, public opinion on social welfare policies will give greater weight to respondents who oppose the government's role in economic welfare (Sunstein, 1994; Berinsky, 2002).

2. Literature Review

2.1. Economic Welfare

Welfare economics is a branch of economics that uses microeconomic techniques to evaluate well-being at the aggregate level. Welfare economic theory is a branch of economics that thinks about ways and techniques to optimize the economic sector with the aim of achieving public welfare using state economic policy instruments. Like every other scientific concept, welfare theory operates on its own assumptions and hypotheses, which form its scientific basis. The categories of optimum, the relationships of individual and social utility, and even the definition of the term "welfare" may be related to this basis. Since it seems impossible to verify the correctness of the basic concepts of economics with reference to current developments, by experts, welfare theory considered a normative theory. The main task of welfare theory is to determine the instruments of economic policy should bring society to a new, more favorable condition. However, it is still necessary to measure welfare with the aim of developing different options to choose from for optimal regulation (Kozlovskyi et al., 2020).

The following journals discuss the problems of increasing economic welfare. To solve the problems of the welfare system, it is no longer possible to rely solely on economic growth. Therefore, it is important for us to look for new ways so that economic welfare can still improve, even though economic growth does not increase (Walker et al., 2021). Then, there are five interrelated dilemmas of improving the welfare system in the absence of economic growth: 1) how the state can provide funding to maintain the welfare system of the people in an economy that is not growing; 2) how to manage any increase in costs to maintain welfare; 3) how to overcome the dependence of structural growth and new behavior in the welfare system; 4) how to manage the increasing demand for people around the world; and 5) how to overcome international political barriers towards welfare transformation for all countries in the world (White, 1979). Whereas governments in states in the United States have often experienced major financial problems caused, among other things, by uncontrolled welfare spending. On the other hand, the development of industry has had a positive impact on social welfare in Iran, so the government can enhance the positive effects of industrialization on social welfare by controlling its negative effects (Basakhaa & Kamal, 2019).

Referring to the literature of the theory of mentioned above, the choice of topic of this study is relevant, where linking the equality in the information distribution of society with the level of welfare can be one of the options for improving welfare in the community when the world.

2.2. Information Distribution

Information distribution is the process of delivering information to recipients, which can do in the few steps. When initially the information conveyed to a limited number of recipients, which will then disseminate simultaneously to a much larger number of recipients. And, this process can also determine the use of a particular language, accompanied by a standard presentation style and use of accepted terminology, with the aim of avoiding misunderstandings. Results of research in the domain of social psychology show that individuals have an emotional tendency to share social information that they consider prominent (Berger, 2011).

The negative things that may occur in the distribution of information discussed in the following journals. The poor distribution of information can occur in a society, that is, when a simultaneous assessment of network structure, information distribution, and emotional valence has opened new avenues for determining how network structures shape the spread of negative memories and false memories, which will eventually lead to collective memory (Choi et al., 2017). Collective memory defined as overlapping items that remembered or forgotten by all members of an individual group (Congleton & Rajaram, 2014).

Regarding the study, the distribution of information in Indonesia that we examine is in the form of development programs which are the policies of the central government which goes through steps. In detail, the development information will flow from the central government to the provincial government, then to the district government, then to the sub-district government, then to the village head who tasked with conveying it to the people living in his village. Referring to the literature which we quoted above, in Indonesia there is a high possibility of overlapping items that remembered or forgotten by villagers and can also form the spread of negative memories and false memories.

2.3. Inequality Measure in Areas of Life

The government has the duty to ensure formally and technically that the people have political freedom, and political equality is one of the objectives of the constitution of democratic countries. However, due to the restrictions on the collection of campaign funds, for example, there are restrictions on individual expenditures related to campaign funds. And this has the potential to increase the phenomenon of exploratory influence which is a weakness or loss of political equality. Second, political equality should be independent of corruption, where people who are able to raise large sums of money for their political interests should not be able to influence the political choices of poor people (Sunstein, 1994). The exclusion bias between political equality and economic equality is a phenomenon that has hitherto neglected in the political science literature. To be precise, the existence of inequalities in resources for political purposes has harmed the welfare goals for the whole society. However, deprived people, where they are concerned that the state has policies for the welfare of the people, will not easily form a coherent and consistent opinion on policies for welfare. As a result, their opinions tend not to capture by various political surveys. Thus, public opinion on social welfare policies will give greater weight to respondents who oppose the government's role in economic welfare (Berinsky, 2002).

Mathematical formulas for calculating inequality measure discussed in the following journals. Modeling equality is developing rapidly in the humanitarian field, where the Gini coefficient is one of the most widely known measures of inequality measure even though it does not actually optimize the original formulation, but uses an alternative definition, for which a new valid inequality measure formula proposed (Alem et al., 2022).

Referring to the literature that we quoted above, inequality measure in all fields is one factor that deserves to investigate. However, since the Gini coefficient is only suitable for measuring inequality measure that occurs at the income level of the population group, in this research we will use a simpler formula, namely in calculating the gap percentage.

2.4. Economic Welfare in Rural Communities

The village is a legal community unit that has territorial boundaries that are authorized to regulate and manage government affairs, the interests of the local community based on community initiatives, origin rights, and/or traditional rights that recognized and respected in the system of government of the Republic of Indonesia. The enactment of the Villages Act provides an opportunity to show their identity in the regulation and management of villages with the community. In addition, the village has the authority to regulate its own household affairs in accordance with social conditions and local customs and the village is no considered implementers who only carryout the policies made by the central government.

Village development is an effort to improve the quality of life and life for the maximum welfare of the village community, according to Law no. 6 of 2014 concerning Villages, article 78 points one explains that the local economic potential of villages is a condition for village development which aims to improve the welfare of rural communities and the quality of human life. And village development depending on local potential and resources can use as an icon of the village and as a differentiator of other villages. It is because each village has its own unique economic, social, cultural, and geographic diversity. So, the enactment of Villages Act 6 of 2014 provided space for a new paradigm in the development of villages in Indonesia. To make it happen, efforts needed so that the village has its own ability to build its village where the development paradigm carried by the village itself is known as the "Developing Village". Village development is an effort to improve the welfare of rural communities, where the Village Building Index (VBI) looks at the initiative and strength of village communities in the process of progress and empowerment of village life which includes social, economic, and ecological resilience. Furthermore, the Village Building Index (VBI) must be able to reach all dimensions of village life, namely social, economic, and ecological or environmental dimensions that give way to sustainable village development that is closely related to village culture and characteristics.

Regulation of the Minister of Villages, Development of Disadvantaged Regions, and Transmigration of the Republic of Indonesia Number 2 Chapter III, Part 1 of 2016 concerning the Developing Village Index has regulated how to calculate the Village Building Index. This act also grouping the villas into five types of villages, sorted from those with the best level of welfare to the worst: independent villages, developed villages, developing villages, underdeveloped villages, and very underdeveloped villages. In detail, the status classification of each village is set with the following thresholds: 1) Very Disadvantaged Villages: Village Building Index < 0.491; 2) Disadvantaged Villages: 0.491> Village Building Index < 0.599; 3) Developing Village: 0.599 > Village Building Index < 0.707; 4) Advanced Village: 0.707 > Village Building Index < 0.815; and 5) Independent Village: Village Building Index > 0.815.

The Village Building Index (VBI) is a Composite Index formed based on three indices, namely 1)SRI (Social Resilience Index) includes Education, Health, Social Capital, and Settlement; 2)ERI (Economic Resilience Index) includes Diversity of Community Production, Access to Trade and Market Centers, Access to Logistics, Access to Banking and Credit, and Regional Openness; and 3)EERI (Ecological/Environmental Resilience Index) includes Environmental Quality, Natural Disasters, and Disaster Response.

Referring to our observations, Cisarua Village, which selected as the research location had a Village Building Index (VBI) of 0.8137, which is the average value of SRI (Social Resilience Index) = 0.8743, EERI (Ecological/Environmental Resilience Index) = 0.9333, and ERI (Economic Resilience Index) = 0.6333. Thus, this means that Cisarua Village classified as a developed village, which classified as having the best economic welfare, where the minimum limit of the Village Building Index is 0.815. Moreover, the weakness of Cisarua Village is that it has low ERI (Economic Resilience Index), which is far below its SRI (Social Resilience Index) and EERI (Ecological/Environmental Resilience Index) scores. In detail, Information Distribution included in the ERI (Economic Resilience Index) group, including Diversity of Community Production, Access to Trade and Market Centers, Access to Logistics, Access to Banking and Credit, and Regional Openness. Then, is the fact that caused the location of Cisarua Village chosen as the research location.

2.5. Information Distribution and the Welfare

The existence of asymmetric information distribution affects minimum wage policies that can increase productivity efficiency that benefits low-skilled workers, as well as reduce inequality measure in society (Su, 2022; Wang, 2017). Information technology used in production activities facilitates the acquisition of more detailed and more precise information have a positive impact at the enterprise level from the acquisition of information on revenue, input use, and profitability (Hennessy & Babcock, 1998). The work ethic has a considerable influence on innovation, which is proven, at least in an auditor institution in Indonesia, workers by instilling the values of worship, which done sincerely, will produce optimally appropriate work and increase the spirit to amend a better future (Oktaroza et al., 2022).

Referring to the literature above, and by paying attention to the literature cited in the previous four subchapters, the inequality measure or asymmetric distribution of information that exists between the government and villagers in Indonesia should suspected of having a negative influence that hinders the progress of the village's economic welfare.

2.6. The Influence of Leadership and Innovation

Sustainable leadership for leaders is not only beneficial in terms of protecting the environment and people, but also encourages increased organizational learning, where increased organizational learning leads to better sustainable performance, including social initiatives (Woo, 2022). And, knowledge sharing, individual creativity, and community absorption can increase the innovation of a community (Zhao et al., 2020). The results of the two literatures provide inspiration for this study, where the village studied here is in the stagnant condition and there are no innovations by the leaders or residents to increase the welfare which is thought due to the low leadership qualities and the low absorption of the community due to the low level of community education. Proving the truth of this hypothesis is done by examining the Level of Readiness and then comparing the results obtained by the village leaders and the people.

3. Research Methodology

3.1. Mixed Method Research

Mixed methods research, in which quantitative and qualitative methods combined, will increasingly recognized, and used because it has the potential to take advantage of the strengths of each approach, and is appropriate for today's increasingly complex socioeconomic conditions. Therefore, this study will use a combination of qualitative and quantitative methods because the relationship between the level of equality of information distribution and the level of economic welfare is a complex problem.

3.2. Qualitative Method

In general, qualitative methods used to examine the condition of natural objects where the researcher is the key instrument, where the qualitative approach will encourage the achievement of more in-depth data, especially with the involvement of the researchers themselves in the field. In this study, we are collecting data that can be related to the instrument or object of research. In this case, initially, related to efforts to obtain data, this type of research is a case study because this research uses a descriptive qualitative approach, where the preparation of the questionnaire refers to the written and or oral statements of the respondents. In detail, the primary data sources in this study obtained directly by means of interviews, observation, questionnaires, and documentation. Before, the number of respondents in this study was hundred people, was determined based on the application of the Slovin formula with a sampling error rate of 10%, where the key respondents were the Village Head, Village Apparatus, and Community. In detail, the number of samples is one hundred people consisting of ninety-six community members and four village governments.

The research uses non-probability and accidental sampling techniques, meaning that the sample taken by chance, where the respondent who happens to meet the researcher and judged as a suitable person to be the sample. And, the sample and population showed in table 1.

Table 1: Sample Size & Population

The table is processed from the observations in this study

3.3. Quantitative Method

The application of quantitative methods identifies the stages of respondents' readiness to become more prosperous by using the Community Readiness Model assessment, namely by assigning a score to each respondent and calculating the average value for each dimension (Plested et al., 2009). Then, the measurement scale uses a Likert scale, which used to measure attitudes, opinions, and perceptions of a person or group of people about social phenomena, where the measured variables translated into variable indicators. And indicators are the starting point for compiling instrument items in the form of questions or statements.

In detail, the value weight of the answer’s alternative shown in table 2, and the assessment of the level of community readiness shown in table 3.

Table 2: Value Weight of Answer

Source: (Plested, Jumper-Thurman, & Edwards, 2009)

Table 3: Level of Community Readiness

Source: (Plested, Jumper-Thurman, & Edwards, 2009)

3.4. Research Model

The research framework showed in Figure 1. In detail, there are three research variables, which community knowledge, information distribution, and resources. Then, the community knowledge variable consists of two dimensions, which community knowledge level and Level of public awareness. And, the information distribution variable consists of two dimensions, which community support and public knowledge of the issues. Finally, the resource variable consists of one dimension, namely human resources. Therefore, the variables and dimensions of the research become a measure of achievement, namely economic welfare. Then, the research will explore the scores for each dimension and variable so that the readiness of the village to improve economic welfare can be known.

Figure 1: Research Model

3.5. Variables Operational

Operational variables designed for this study shown in table 4.

Table 4: Variables Operational

The table refers to the Research Methodology in this study

4. Results and Discussion

4.1. Village and Respondent’s Profile

Cisarua Village which chosen as the location of this study is one of the villages in Sukaraja District, Sukabumi Regency West Java Province with a population until 2021 according to Cisarua Village data reaching 7570 people consisting of 2526 households. More, this village has a Village Building Index (VBI) of 0.8137, which included as a developed village or the second group in the classification of the level of village prosperity in Indonesia, and almost belongs to the most prosperous village group, which required to having a minimum Building Village Index (IBV) of 0.815. To be precise, this village has the potential of social, economic, and ecological resources, as well as the ability to manage them to improve the welfare of rural communities, quality of life, and reduce poverty, so it is interesting to study what socio-cultural reasons have caused this village to have not been able to reach the category of independent village.

The education level of the working age population is low, where from the data there are 58.65% of the working age residents who only graduated from junior high school or less. And the majority worked as farm laborers, with a low salary of 47.91 % of the working age population, this is in line with the low level of education of the residents of Cisarua village. The following tables five show the respondent’s profile.

Table 5: Respondent’s Profile

The table is processed from the questionnaire in this study

4.2. Statistical Test

4.2.1. Validity Test

In this study, the method used to evaluate the validity of the research instrument is the Pearson correlation test. Validity test is a test carried-out to determine how well the measuring instrument used can measure research variables. Where, it is necessary to calculate df = n – 2, with n being the number of respondents, to find out the r table which will later compared with the Pearson correlation value or can referred to as the calculated r value of each statement. Then, if the value of r arithmetic > r table, then the statements in the research instrument which in this study means that the questionnaire said to be valid.

4.2.2. Reliability Test

In this study, the method used to evaluate the reliability of the research instrument, which means that in this study, the questionnaire is using the Cronbach Alpha method. Reliability test is a test carried-out to determine how consistent the measuring instrument used and free of errors. Cronbach's Alpha Value Range: alpha < 0.50 low reliability; 0.50 < alpha < 0.70 moderate reliability; alpha > 0.70 then the reliability is sufficient; alpha > 0.80 then strong reliability; alpha > 0.90 then perfect reliability (Bujang et al., 2018).

Table 6 are the results of validity testing and reliability testing, which shows that all statements in the questionnaire proven valid and reliable.

Table 6: Validity and Reliability Test Results

The table is processed from the questionnaire in this study

4.2. Level of Readiness Analysis

The results of the calculation of the Readiness Level the Cisarua Village towards an economic independence village which means that villages are in the most prosperous level group in Indonesia presented in table 7.

Tabel 7: Level of Readiness Calculation

The table is processed from the questionnaire in this study

The results of the analysis of the calculation of the level of readiness of Cisarua village to lead to a prosperous society summarized as follows:

[1]. Readiness level of the village's government is stabilization or is at the seventh level of the nine levels, while for the village's community there is a preparation or at the fifth level.

[2]. The highest level of the village's government obtained at the level of public awareness dimension, which is getting a score of 4.50 which means is Confirmation or Expansion or is at the eighth level of the nine levels, or it said that it is in a ready condition. Furthermore, because the level of public awareness dimension has the indicator "Level of public awareness about village development to improve community welfare", this indicates that the information distribution from the central government to the village's government has been successful.

[3]. The highest level of the village's community obtained in the Community Support and Human Resource dimensions, which get a score of 3.60 which means is initiation or is at the six levels of the nine levels. Furthermore, because the level of community support has the indicator "Community support for village development to improve community welfare" and the level of human resource has the indicator "Community Attitudes towards the management of natural resources and the environment” these indicate that the community has advantages on attitudes or behaviors that are taught in the household from generation to generation, not obtained from schools or from the mass media, and also not obtained from the government.

[4]. The community's lowest score obtained from the Public Knowledge of Issues dimension, which only gets a value of 2.90 which means is at the preplanning level. Furthermore, because the Public Knowledge of Issues dimension has the indicator "Community knowledge about the opportunities, constraints, strengths, and weaknesses of village development for the welfare of the community", this shows that for the community to be more prosperous.

5. Discussion of Result

5.1. Improving Economic Welfare

The results of the calculation of the level of readiness of Cisarua village, which is one of the rural villages in Indonesia, show that there is a weakness in the variable information distribution from the central government to the rural village community, which is carried out in stages from the central government to the provincial government, then to the district government, then to the district government, Sub-district government, then to the village government, and finally to the villagers. In detail, the scores obtained on the distribution information variable which consists of two dimensions, namely Community Support and Public Knowledge of Issues are 3.9 (government) and 3.25 (community), which is lower than the average value of all variables and dimensions, namely 4.08 (government) and 3.36 (community).

The study result is supported by the following journals. State, meaning in United Kingdom, at the research location and when this paper written, considered to know information about the distribution of individual welfare, namely related to the redistribution of assets regulated by the state. Then, if there is a distribution of this information to the public, then there is a demand by the community for the state to implement a welfare policy (Dasgupta, 1986).

In contrast, (Thewissen & Rueda, 2019) stated that advances in information technology have led individuals to think that there is an increased risk of losing future income due to automation in addition; wealthier individuals have more to lose from automation. This is a negative view of the results of this research, which shows the opposite fact, that the distribution of information will promote the welfare state, as the authors of this article believe. In that case, we argue that this difference could be due to the location of the study in the authors of the paper.

5.2. The Weakness

An important finding from this research is the existence of inequality measure in the form of a high gap between the scores obtained by the village's government compared to the community scores, and this is the most important in causing the welfare level of the Cisarua village to be in a state that is not ready to improve. In detail, calculation results presented in table 8, the gap between the village's government and the village's community readiness scores is the same as (4.08 – 3.36) /3.36 = 21.4%. Furthermore, the gap between the highest score obtained by the village's government (Level of public awareness dimension) and the lowest score obtained by the village's community (Public Knowledge of Issues) is = (4.50-2.9)/2.9 = 55.2%.

The results of this study are in accordance with those written by Drupp et al. (2018), that economic valuations should also consider distributional effects to ensure equity and should explicitly consider economic inequalities. In addition, an assessment that includes the distributional impact of environmental policies must consider the distribution of non-market environmental benefits. This paper concludes with a positive view that is in line with the results of this study.

Mullatahiri and Ukaj (2019) who examined the level of satisfaction of mobile phone customers in Kosovo concluded that there is a close relationship between electronic communication, brand image and customer satisfaction, where electronic communication is a key factor in building brand image, encouraging customer satisfaction., and leads to customer commitment and loyalty. And this study finds the same thing that the unequal distribution of electronic information between leaders and village communities has led to a lack of enthusiasm for progress and pride in their village which not felt in the community.

6. Conclusions

6.1. Summary

The results of the analysis of the calculation of the level of readiness of the village to lead to a prosperous society summarized as follows: (a) Readiness level of the village's government is at the seventh level of the nine levels, while the village's community at the fifth level; (b) The highest level of the village's government obtained at the level of public awareness dimension, which indicates that the information distribution from the central government to the village's government has been successful; (c) The highest level of the village's community obtained in the Community Support and Human Resource dimensions, which indicate that the community has the behaviors that are taught in the household from generation to generation, not obtained from schools or from the mass media, and also not obtained from the government; (c) The community's lowest score obtained from the Public Knowledge of Issues dimension, which shows that for the community to be more prosperous, efforts needed extra weight from the central government.

6.2. Implications

The research has contributed to the belief that the government could improve the welfare of their people, if the causal factors that hinder the achievement of such welfare can found. Where, the weaknesses of the villagers studied here were mainly found in two things, which the behaviors is not obtained from schools, or from the mass, and that the community's lowest score obtained from the Public Knowledge of Issues. Then, the implication of the summary conclusion is that there must be a strong effort from the central government to ensure that technology, especially information and communication technology is more evenly distributed to all villagers. This refers that incorporating technology into daily operations is the ways that can be done to foster a culture of caring for the environment. (Kang, 2022). And, the global trend shows that the development of ICT, especially in the spread of Internet access, the effective use of web technology in the field of e-commerce, is a competitive advantage factor that drives socio-economic growth (Bilan et al., 2019).

6.3. Limitations and Future Research

The limitation of this research is that it only collects secondary and primary data from the villagers, which from the results implies that there must be hard work from the central government to overcome the weaknesses of the villagers to develop their economic welfare. So, there needs to be future research to develop a detailed central government program, according to the conclusions and implications of this research.