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Urban-Rural Differences in Costs of Living and Their Impact on Poverty Measures

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  • Abuzar Asra

Abstract

This note demonstrates empirically the importance of urban-rural price differences and inflation figures in poverty analysis. Using data from the National Socio-Economic Survey (Survei Sosial Ekonomi Nasional, widely known as Susenas), it shows that the urban-rural food price differential during the period 1987-96 was 13-16%, not 28-52% as impli by the 'official' food poverty lines. The urban-rural poverty comparisons and the components of change in simulated poverty estimates presented here therefore differ from those based on the 'official' figures. They indicate that migration to urban areas between 1987 and 1996 accounts for a significant part of the observed decline in poverty. The paper concludes that it is essential to use accurate urban-rural cost of living differences in deriving aggregate, urban and rural poverty estimates.

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  • Abuzar Asra, 1999. "Urban-Rural Differences in Costs of Living and Their Impact on Poverty Measures," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 35(3), pages 51-69.
    • Handle: RePEc:taf:bindes:v:35:y:1999:i:3:p:51-69
    DOI: 10.1080/00074919912331337687
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    References listed on IDEAS

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    1. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
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    Cited by:

    1. Robert J. Hill & Iqbal Syed, 2010. "Improving International Comparisons of Real Output: The ICP 2005 Benchmark and its Implications for China," Discussion Papers 2010-25, School of Economics, The University of New South Wales.
    2. Robert J. Hill & Iqbal A. Syed, 2012. "Accounting for Unrepresentative Products and Urban-Rural Price Differences in International Comparisons of Real Income: An Application to the Asia-Pacific Region," Graz Economics Papers 2012-07, University of Graz, Department of Economics.
    3. Emmanuel Skoufias, 2001. "Changes in regional inequality and social welfare in Indonesia from 1996 to 1999," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(1), pages 73-91.
    4. Dhanani, Shafiq & Islam, Iyanatul, 2002. "Poverty, Vulnerability and Social Protection in a Period of Crisis: The Case of Indonesia," World Development, Elsevier, vol. 30(7), pages 1211-1231, July.
    5. Daniel Suryadarma & Rima Prama Artha & Asep Suryahadi & Sudarno Sumarto, "undated". "A Reassessment of Inequality and Its Role in Poverty Reduction in Indonesia," Working Papers 364, Publications Department.
    6. Bas van Leeuwen & Peter Foldvari, 2012. "The development of inequality and poverty in Indonesia, 1932-1999," Working Papers 0026, Utrecht University, Centre for Global Economic History.
    7. Daniel Suryadarma & Wenefrida Dwi Widyanti & Asep Suryahadi & Sudarno Sumarto, "undated". "From Access to Income: Regional and Ethnic Inequality in Indonesia," Working Papers 356, Publications Department.
    8. Menno Pradhan, 2001. "Welfare Analysis with a Proxy Consumption Measure – Evidence from a Repeated Experiment in Indonesia," Tinbergen Institute Discussion Papers 01-092/2, Tinbergen Institute.
    9. Robert J. Hill & Iqbal A. Syed, 2015. "Improving International Comparisons of Prices at Basic Heading Level: An Application to the Asia-Pacific Region," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(3), pages 515-539, September.
    10. Widodo, Tri, 2000. "The Impact of Economic Crisis on Welfare of Rural and Urban Households: a Case Study of Indonesia," MPRA Paper 78114, University Library of Munich, Germany.
    11. Muhammad Nashihin, 2009. "An examination of methods to estimate poverty line in Indonesia," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 1(3), pages 161-175, April.
    12. Emmanuel Skoufias & Asep Suryahadi, 2000. "Changes in Household Welfare, Poverty and Inequality During the Crisis," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 36(2), pages 97-114.

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