Bivariate Binary Probit Model for Modeling Human Development

Index ( HDI ) and Poverty Index

(Case Study : in East Java 2012)

Name : Merly Fatriana Bintariningrum

NRP : 1313201907
Supervisor : Dr. Vita Ratnasari, M.Si

ABSTRACT

Indicators that often used by countries in the world to measure the

progress of the country based on the results of development is the Human
Development Index ( HDI ) . While the poverty index is considered as a failure to
achieve or the shortage forming element of HDI. Indonesia is a developing
country which has a very large number of people in poverty. Areas that have high
poverty index tend to have a low HDI. East Java has the largest number of people
in poverty in Indonesia, and also has low HDI. To minimize poverty and improve
HDI need to know the appropriate model of the two variables in order to identify
the factors that influence them. Probit model regression is a model to explain the
pattern of the relationship of a categorical response variable. Bivariate probit
model is a binary probit model involving two response variables, each of which
has two categories. In bivariate binary probit model, it is assumed that has
relationship between response variable. Estimation of binary bivariate probit
model parameters using maximum likelihood estimation (MLE) and Newton
Raphson iteration . To get the best model based on the smallest value of AIC
( Akaike Information Criterion ). Based on the best model obtained, the variables
that significantly influence the HDI and the poverty index are variable school
participation rates and economic growth.

Keywords : AIC, Bivariate Binary Probit Model,Human Development Index

(HDI), MLE, Poverty Index