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Does Economic Growth Really Benefit the Poor? Income Distribution Dynamics and Pro-poor Growth in Indonesia

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  • Indunil De Silva
  • Sudarno Sumarto

Abstract

We explore the nexus between poverty, inequality, and economic growth in Indonesia between 2002 and 2012, using several pro-poor growth concepts and indices to determine whether growth in this period benefited the poor. Our regression-based decompositions of poverty into growth and redistribution components suggest that around 40% of inequality in total household expenditure in Indonesia was due to variations in expenditure by education characteristics that persisted after controlling for other factors. We find that economic growth in this period benefited households at the top of the expenditure distribution, and that a 'trickle down' effect saw the poor receive proportionately fewer benefits than the non-poor. If reducing poverty is one of the Indonesian government's principal objectives, then policies designed to spur growth must take into account the possible impacts of growth on inequality.

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  • Indunil De Silva & Sudarno Sumarto, 2014. "Does Economic Growth Really Benefit the Poor? Income Distribution Dynamics and Pro-poor Growth in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 50(2), pages 227-242, August.
    • Handle: RePEc:taf:bindes:v:50:y:2014:i:2:p:227-242
    DOI: 10.1080/00074918.2014.938405
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    Cited by:

    1. Dartanto, Teguh & Otsubo, Shigeru, 2016. "Intrageneration Poverty Dynamics in Indonesia: Households’ Welfare Mobility Before, During, and After the Asian Financial Crisis," Working Papers 117, JICA Research Institute.
    2. Hal Hill, 2020. "Indonesian Living Standards over 50 Years: A Multidimensional Analysis," Asian Economic Journal, East Asian Economic Association, vol. 34(3), pages 249-274, September.
    3. Takahiro Akita & Sachiko Miyata, 2020. "Assessing Pro-poorness of Regional Economic Growth: Evidence from Indonesia, 2004-2014," Working Papers EMS_2020_03, Research Institute, International University of Japan.
    4. Ryan Edwards, 2015. "Is plantation agriculture good for the poor? Evidence from Indonesia's palm oil expansion," Departmental Working Papers 2015-12, The Australian National University, Arndt-Corden Department of Economics.
    5. Cuong V. Nguyen & Nguyet M. Pham, 2018. "Economic growth, inequality, and poverty in Vietnam," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 32(1), pages 45-58, May.
    6. Asep Suryahadi & Ridho Al Izzati & Daniel Suryadarma & Teguh Dartanto, 2023. "How Inequality Affects Trust in Institutions: Evidence from Indonesia," Asian Economic Policy Review, Japan Center for Economic Research, vol. 18(1), pages 73-91, January.
    7. Takahiro Akita & Sachiko Miyata, 2020. "Urban and Rural Dimensions of the Role of Education in Inequality: A Comparative Analysis between Indonesia, Myanmar, and the Philippines," Working Papers EMS_2020_04, Research Institute, International University of Japan.
    8. Aekapol Chongvilaivan & Jungsuk Kim, 2016. "Individual Income Inequality and Its Drivers in Indonesia: A Theil Decomposition Reassessment," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 126(1), pages 79-98, March.
    9. Hal Hill, 2018. "Asia's Third Giant: A Survey of the Indonesian Economy," The Economic Record, The Economic Society of Australia, vol. 94(307), pages 469-499, December.
    10. Van Le, Dao & Tran, Tuyen Quang, 2022. "Does the private sector increase inequality? Evidence from a transitional country," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 451-466.

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