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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.

Suggested Citation

  • 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.
    2. Ravallion, M., 1992. "Poverty Comparisons - A Guide to Concepts and Methods," Papers 88, World Bank - Living Standards Measurement.
    3. Arsenio M. Balisacan, 2001. "Poverty in the Philippines : An Update and Reexamination," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 38(1), pages 15-52, June.
    4. Ravallion, Martin & Huppi, Monika, 1991. "Measuring Changes in Poverty: A Methodological Case Study of Indonesia during an Adjustment Period," World Bank Economic Review, World Bank Group, vol. 5(1), pages 57-82, January.
    5. Ravallion, Martin & van de Walle, Dominique, 1989. "Cost of living differences between urban and rural areas in Indonesia," Policy Research Working Paper Series 341, The World Bank.
    6. 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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    Cited by:

    1. 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.
    2. 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.
    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., 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. 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.

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