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The effects of location and sectoral components of economic growth on poverty: Evidence from Indonesia

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  • Suryahadi, Asep
  • Suryadarma, Daniel
  • Sumarto, Sudarno

Abstract

In this paper, we investigate the relationship between economic growth and poverty reduction by differentiating growth and poverty into their sectoral composition and urban-rural location using data from Indonesia. We find that rural services growth reduces poverty in all sectors and locations. However, urban services growth has the largest effect on poverty in most sectors. Finally, we also find that rural agriculture growth strongly reduces poverty in rural areas, the largest contributor to poverty in Indonesia. This implies that while agriculture growth in rural areas still plays a major role in reducing poverty, policies that enable strong growth in the services sector in both urban and rural areas would expedite poverty reduction.

Suggested Citation

  • Suryahadi, Asep & Suryadarma, Daniel & Sumarto, Sudarno, 2009. "The effects of location and sectoral components of economic growth on poverty: Evidence from Indonesia," Journal of Development Economics, Elsevier, vol. 89(1), pages 109-117, May.
    • Handle: RePEc:eee:deveco:v:89:y:2009:i:1:p:109-117
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    References listed on IDEAS

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    1. Rana Hasan & M. G. Quibria, 2004. "Industry Matters for Poverty: A Critique of Agricultural Fundamentalism," Kyklos, Wiley Blackwell, vol. 57(2), pages 253-264, May.
    2. Neil McCulloch & Julian Weisbrod & C. Peter Timmer, 2007. "Pathways out of poverty during an economic crisis: An empirical assessment of rural Indonesia," Departmental Discussion Papers 131, University of Goettingen, Department of Economics.
    3. Ravallion, Martin & Datt, Gaurav, 1996. "How Important to India's Poor Is the Sectoral Composition of Economic Growth?," The World Bank Economic Review, World Bank, vol. 10(1), pages 1-25, January.
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    5. James A. Levinsohn & Steven T. Berry & Jed Friedman, 2003. "Impacts of the Indonesian Economic Crisis.Price Changes and the Poor," NBER Chapters, in: Managing Currency Crises in Emerging Markets, pages 393-428, National Bureau of Economic Research, Inc.
    6. Pradhan, Menno, et al, 2001. "Eating Like Which "Joneses?" An Iterative Solution to the Choice of a Poverty Line "Reference Group."," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 47(4), pages 473-487, December.
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    8. Ravallion, Martin & Chen, Shaohua, 2007. "China's (uneven) progress against poverty," Journal of Development Economics, Elsevier, vol. 82(1), pages 1-42, January.
    9. Asep Suryahadi & Sudarno Sumarto & Lant Pritchett, 2003. "Evolution of Poverty During the Crisis in Indonesia," Asian Economic Journal, East Asian Economic Association, vol. 17(3), pages 221-241, September.
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    13. Loayza, Norman V. & Raddatz, Claudio, 2010. "The composition of growth matters for poverty alleviation," Journal of Development Economics, Elsevier, vol. 93(1), pages 137-151, September.
    14. Asep Suryahadi & Daniel Suryadarma & Sudarno Sumarto & Jack Molyneaux, "undated". "Agricultural Demand Linkages and Growth Multiplier in Rural Indonesia," Working Papers 355, Publications Department.
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