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Revisiting the Impact of Consumption Growth and Inequality on Poverty in Indonesia during Decentralisation

Listed author(s):
  • Riyana Miranti
  • Alan Duncan
  • Rebecca Cassells

This article analyses the consumption growth elasticity and inequality elasticity of poverty in Indonesia, with a particular focus on the decentralisation period. Using provincial panel data, we show that the effectiveness of growth in alleviating poverty across provinces was greater during decentralisation-that is, between 2002 and 2010-than at any other point since 1984. The growth elasticity of poverty since 2002 is estimated to have been -2.46, which means that a 10% increase in average consumption per capita would have reduced the poverty rate by almost 25%. However, we also find that rising income inequality negated a quarter to a third of the 5.7-percentage-point reduction in the headcount poverty rate. This increasing inequality has contributed to a lower level of pro-poor growth than that maintained in Indonesia before decentralisation.

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Article provided by Taylor & Francis Journals in its journal Bulletin of Indonesian Economic Studies.

Volume (Year): 50 (2014)
Issue (Month): 3 (December)
Pages: 461-482

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Handle: RePEc:taf:bindes:v:50:y:2014:i:3:p:461-482
DOI: 10.1080/00074918.2014.980377
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