Number Crunching

Poverty and Economic Growth in Indonesia (1976-2013)

Is economic growth influencing the rate of poverty in Indonesia?

(Probable) answers in relevant articles:

1. The trend in the growth elasticity of poverty indicates that the power of each percent of economic growth to reduce poverty did not change greatly between the pre- and post-Asian Financial Crisis time periods (Suryahadi et al 2012).

2. Service sector growth made the largest contribution to poverty reduction in both rural and urban areas, while industrial sector growth largely became irrelevant for poverty reduction in the post-crisis period even though the sector contributed the second-largest share of GDP. Meanwhile, agricultural sector growth remained important, but in rural areas only (ibid).

3. Before AFC, Indonesia’s overall growth and poverty reduction experience appears to be consistent with the findings of studies using cross-country regressions (e.g. Dollar and Kraay 2001). It suggests that the incomes of the poor move one-for-one with overall average incomes, suggesting that poverty reduction requires nothing much more than promoting rapid economic growth.

4. Growth and poverty reduction vary enormously across the island groups, provinces, and districts of Indonesia (Hill 1996, 2002; Tadjoeddin et al. 2001; ADB 2001; Booth 2000; Asra 2000). Evidence, though limited, shows that this variance is widening, not converging, and is becoming a politically sensitive issue, given its ethnic dimensions (Hill 2002). In contrast, changes in the Human Development Index numbers for Indonesia indicate that regional convergence is taking place, although its speed is decreasing (Vidyattama 2013).