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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.

Suggested Citation

  • 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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    References listed on IDEAS

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    1. Lustig, Nora & Lopez-Calva, Luis F. & Ortiz-Juarez, Eduardo, 2013. "Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico," World Development, Elsevier, vol. 44(C), pages 129-141.
    2. Lustig, Nora & Lopez-Calva, Luis F. & Ortiz-Juarez, Eduardo, 2013. "Deconstructing the decline in inequality in Latin America," Policy Research Working Paper Series 6552, The World Bank.
    3. Teguh Dartanto & Nurkholis, 2013. "The determinants of poverty dynamics in Indonesia: evidence from panel data," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 49(1), pages 61-84, April.
    4. Suryahadi, Asep & Suryadarma, Daniel & Sumarto, Sudarno, 2009. "The effects of location and sectoral components of economic growth on poverty: Evidence from Indonesia," Journal of Development Economics, Elsevier, vol. 89(1), pages 109-117, May.
    5. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-764, July.
    6. Augustin Kwasi Fosu, 2009. "Inequality and the Impact of Growth on Poverty: Comparative Evidence for Sub-Saharan Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 45(5), pages 726-745.
    7. Asep Suryahadi & Gracia Hadiwidjaja & Sudarno Sumarto, 2012. "Economic growth and poverty reduction in Indonesia before and after the asian financial crisis," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 48(2), pages 209-227, August.
    8. Ravallion, Martin & Chen, Shaohua, 2003. "Measuring pro-poor growth," Economics Letters, Elsevier, vol. 78(1), pages 93-99, January.
    9. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
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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. repec:bla:apacel:v:32:y:2018:i:1:p:45-58 is not listed on IDEAS
    3. 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.
    4. repec:bla:ecorec:v:94:y:2018:i:307:p:469-499 is not listed on IDEAS

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