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The Distributional Impacts of Indonesia's Financial Crisis on Household Welfare: "A Rapid Response Methodology"

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Author Info
Jed Friedman
James Levinsohn

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Abstract

Analyzing the distributional impacts of economic crises is important and, unfortunately, an ever more pressing need. If policymakers are to intervene to help those most adversely impacted, then policymakers need to identify those who have been most harmed and the magnitude of that harm. Furthermore, policy responses to economic crises typically must be timely. In this paper, we develop a simple methodology to fill the order and we've applied our methodology to analyze the impact of the Indonesian economic crisis on household welfare there. Using only pre-crisis household information, we estimate the compensating variation for Indonesian households following the 1997 Asian currency crisis and then explore the results with flexible non-parametric methods. We find that virtually every household was severely impacted, although it was the urban poor that fared the worst. The ability of poor rural households to produce food mitigated the worst consequences of the high inflation. The distributional conseqences are the same whether we allow households to substitute towards relatively cheaper goods or not. However the geographic location of the household mattered even within urban or rural areas and household income categories. Additionally, households with young children may have suffered disproportionately adverse effects.

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Publisher Info
Paper provided by William Davidson Institute at the University of Michigan Stephen M. Ross Business School in its series William Davidson Institute Working Papers Series with number 387.

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Date of creation: 01 Jul 2001
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Handle: RePEc:wdi:papers:2001-387

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Related research
Keywords: Indonesia; currency crisis; welfare distribution; compensating variation; non-parametric regression;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Deaton, A., 1990. "Price Elasticities From Surveys Data: Extensions And Indonesian Results," Papers 69, World Bank - Living Standards Measurement.
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  2. Deaton, Angus, 1988. "Quality, Quantity, and Spatial Variation of Price," American Economic Review, American Economic Association, vol. 78(3), pages 418-30, June. [Downloadable!] (restricted)
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  3. Benjamin, Dwayne, 1992. "Household Composition, Labor Markets, and Labor Demand: Testing for Separation in Agricultural Household Models," Econometrica, Econometric Society, vol. 60(2), pages 287-322, March. [Downloadable!] (restricted)
  4. Chaudhuri, Shubham & Ravallion, Martin, 1994. "How well do static indicators identify the chronically poor?," Journal of Public Economics, Elsevier, vol. 53(3), pages 367-394, March. [Downloadable!] (restricted)
  5. repec:fth:michin:446 is not listed on IDEAS
  6. Angus Deaton & Christina Paxson, 1998. "Economies of Scale, Household Size, and the Demand for Food," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 897-930, October. [Downloadable!] (restricted)
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  7. Case, Anne C, 1991. "Spatial Patterns in Household Demand," Econometrica, Econometric Society, vol. 59(4), pages 953-65, July. [Downloadable!] (restricted)
  8. James Levinsohn & Steven Berry & Jed Friedman, 1999. "Impacts of the Indonesian Economic Crisis: Price Changes and the Poor," NBER Working Papers 7194, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Thomas, Duncan & Beegle, Kathleen & Frankenberg, Elizabeth & Sikoki, Bondan & Strauss, John & Teruel, Graciela, 2004. "Education in a crisis," Journal of Development Economics, Elsevier, vol. 74(1), pages 53-85, June. [Downloadable!] (restricted)
  10. Frankenberg, E. & Thomas, D. & Beegle, K., 1999. "The Real Costs of Indonesia's Economic Crisis: Preliminary Findings from the Indonesia Family Life Surveys," Papers 99-04, RAND - Labor and Population Program.
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  11. Ravallion, Martin & Bidani, Benu, 1994. "How Robust Is a Poverty Profile?," World Bank Economic Review, Oxford University Press, vol. 8(1), pages 75-102, January.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Porto, Guido G., 2004. "Informal export barriers and poverty," Policy Research Working Paper Series 3354, The World Bank. [Downloadable!]
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  2. Dessus, Sebastien & Herrera, Santiago & de Hoyos, Rafael, 2008. "The impact of food inflation on urban poverty and its monetary cost : some back-of-the-envelope calculations," Policy Research Working Paper Series 4666, The World Bank. [Downloadable!]
    Other versions:
  3. Thomas W. Hertel, 2006. "A Survey of Findings on the Poverty Impacts of Agricultural Trade Liberalization," The Electronic Journal of Agricultural and Development Economics, Food and Agriculture Organization of the United Nations, vol. 3(1), pages 1-26. [Downloadable!]
  4. Guido G. Porto, 2003. "Using survey data to assess the distributional effects of trade policy," Policy Research Working Paper Series 3137, The World Bank. [Downloadable!]
    Other versions:
  5. Johannes G. Hoogeveen & Berk Özler, 2005. "Not Separate, Not Equal: Poverty and Inequality in Post-Apartheid South Africa," William Davidson Institute Working Papers Series wp739, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  6. Honohan, Patrick, 2005. "Banking sector crises and inequality," Policy Research Working Paper Series 3659, The World Bank. [Downloadable!]
  7. Charles Ackah, & Simon Appleton, . "Food Price Changes and Consumer Welfare in Ghana in the 1990s," Discussion Papers 07/03, University of Nottingham, CREDIT. [Downloadable!]
  8. Ivanic, Maros & Martin, Will, 2008. "Implications of higher global food prices for poverty in low-income countries," Policy Research Working Paper Series 4594, The World Bank. [Downloadable!]
  9. Steven A. Block & Lynnda Keiss & Patrick Webb & S. Kosen & Regina Moench-Pfanner & Martin W. Bloem & C. Peter Timmer, 2002. "Did Indonesia's Cries of 1997/98 Affect Child Nutrition? A Cohort Decomposition Analysis of National Nutrition Surveillance Data," Working Papers in Food Policy and Nutrition 05, Friedman School of Nutrition Science and Policy. [Downloadable!]
  10. Marina Halac & Sergio Schmukler, 2003. "Distributional effects of crises : the role of financial transfers," Policy Research Working Paper Series 3173, The World Bank. [Downloadable!]
  11. Hertel, Thomas W. & Reimer, Jeffrey J., 2004. "Predicting the poverty impacts of trade reform," Policy Research Working Paper Series 3444, The World Bank. [Downloadable!]
    Other versions:
  12. Jensen, Robert T. & Miller, Nolan, 2008. "The Impact of the World Food Price Crisis on Nutrition in China," Working Paper Series rwp08-039, Harvard University, John F. Kennedy School of Government. [Downloadable!]
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