Indonesia experienced a rapid reduction in poverty during the pre-crisis high growth period prior to 1997. On the other hand, poverty increased very significantly when the economy contracted during the economic crisis. These contrasting episodes provide a natural experiment to assess empirically the relationship between economic growth and poverty. This study finds that economic growth is indeed an essential recipe for poverty reduction. However, not all sectoral components of economic growth contribute equally to poverty reduction. In particular, growth of the services sector, both in urban and rural areas, contributes the most to the reduction in poverty. Another sectoral growth which has significant, albeit relatively small, contribution to poverty reduction is industrial growth in urban areas. This pattern of growth components with significant contributions to poverty reduction is identical for total, urban, and rural poverty.
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Length: 40 pages Date of creation: Mar 2006 Date of revision: Handle: RePEc:eab:develo:692
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Find related papers by JEL classification: O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development I32 - Health, Education, and Welfare - - Welfare and Poverty - - - Measurement and Analysis of Poverty N15 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - Asia including Middle East
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