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A Reassessment of Inequality and Its Role in Poverty Reduction in Indonesia

Author Info

Listed author(s):
  • Daniel Suryadarma

    (SMERU)

  • Rima Prama Artha
  • Asep Suryahadi
  • Sudarno Sumarto

Abstract

This study provides an overview of inequality in Indonesia for the period of 1984 to 2002 using several widely used measurements of inequality. Firstly, unlike previous studies, our paper uses real consumption expenditure that takes into account the high regional price disparity across regions in Indonesia. Secondly, we found that, although during the crisis all measures indicate a decrease in inequality, it actually increased for those below the poverty line. Finally, this study also provides an estimation of distribution corrected growth elasticity of poverty for Indonesia. This proves to be an important explanation for the fact that the poverty rate decreased very rapidly between 1999 and 2002 : because inequality during the peak of the economic crisis in 1999 was at its lowest level in 15 years.

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File URL: http://130.56.61.71/node/22543
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Paper provided by East Asian Bureau of Economic Research in its series Development Economics Working Papers with number 22543.

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Date of creation: Jan 2005
Handle: RePEc:eab:develo:22543
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Keywords: Inequality; real consumption expenditure; regional price disparity; growth elasticity of poverty; economic crisis; Indonesia;

Find related papers by JEL classification:

  • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
  • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
  • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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  1. Pradhan, Menno & Suryahadi, Asep & Sumarto, Sudarno & Pritchett, Lant, 2000. "Measurements of poverty in Indonesia - 1996, 1999, and beyond," Policy Research Working Paper Series 2438, The World Bank.
  2. James Hines & Hilary Hoynes & Alan B. Krueger, 2001. "Another Look at Whether a Rising Tide Lifts All Boats," Working Papers 833, Princeton University, Department of Economics, Industrial Relations Section..
  3. Ravallion, Martin, 1997. "Can high-inequality developing countries escape absolute poverty?," Economics Letters, Elsevier, vol. 56(1), pages 51-57, September.
  4. Stephen P. Jenkins & Philippe Van Kerm, 2006. "Trends in income inequality, pro-poor income growth, and income mobility," Oxford Economic Papers, Oxford University Press, vol. 58(3), pages 531-548, July.
  5. Pradhan, Menno, et al, 2001. "Eating Like Which "Joneses?" An Iterative Solution to the Choice of a Poverty Line "Reference Group."," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 47(4), pages 473-487, December.
  6. James A. Levinsohn & Steven T. Berry & Jed Friedman, 2003. "Impacts of the Indonesian Economic Crisis.Price Changes and the Poor," NBER Chapters,in: Managing Currency Crises in Emerging Markets, pages 393-428 National Bureau of Economic Research, Inc.
  7. Dirk Kreuger & Fabrizio Perri, 2002. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory," Working Papers 02-15, New York University, Leonard N. Stern School of Business, Department of Economics.
  8. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters,in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92 National Bureau of Economic Research, Inc.
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  10. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
  11. Louis Kaplow, 2005. "Why measure inequality?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 3(1), pages 65-79, April.
  12. repec:ebl:ecbull:v:4:y:2003:i:3:p:1-5 is not listed on IDEAS
  13. Wan, Guanghua, 2002. "Regression-based Inequality Decomposition: Pitfalls and a Solution Procedure," WIDER Working Paper Series 101, World Institute for Development Economic Research (UNU-WIDER).
  14. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
  15. Emmanuel Skoufias & Asep Suryahadi, 2000. "Changes in Household Welfare, Poverty and Inequality During the Crisis," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 36(2), pages 97-114.
  16. Takahiro Akita, 2002. "Income Inequality in Indonesia," Working Papers EMS_2002_02, Research Institute, International University of Japan.
  17. repec:ebl:ecbull:v:4:y:2003:i:7:p:1-6 is not listed on IDEAS
  18. Takahiro Akita, 2002. "Regional Income Inequality In Indonesia And The Initial Impact Of The Economic Crisis," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 38(2), pages 201-222.
  19. Martin Feldstein, 1998. "Income Inequality and Poverty," NBER Working Papers 6770, National Bureau of Economic Research, Inc.
  20. Richard Blundell & Ian Preston, 1998. "Consumption Inequality and Income Uncertainty," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 603-640.
  21. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
  22. Asep Suryahadi & Sudarno Sumarto & Lant Pritchett, 2003. "Evolution of Poverty During the Crisis in Indonesia," Asian Economic Journal, East Asian Economic Association, vol. 17(3), pages 221-241, 09.
  23. Asep Suryahadi & Sudarno Sumarto, 2003. "Poverty and Vulnerability in Indonesia Before and After the Economic Crisis," Asian Economic Journal, East Asian Economic Association, vol. 17(1), pages 45-64, 03.
  24. repec:ebl:ecbull:v:4:y:2003:i:29:p:1-12 is not listed on IDEAS
  25. Mª Casilda Lasso de la Vega & Ana Marta Urrutia, 2003. "A new factorial decomposition for the atkinson measure," Economics Bulletin, AccessEcon, vol. 4(29), pages 1-12.
  26. Stéphane Mussard & Michel Terraza & Françoise Seyte, 2003. "Decomposition of Gini and the generalized entropy inequality measures," Economics Bulletin, AccessEcon, vol. 4(7), pages 1-6.
  27. Asep Suryahadi & Wenefrida Widyanti & Sudarno Sumarto, 2003. "Short-term poverty dynamics in rural Indonesia during the economic crisis," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(2), pages 133-144.
  28. Orazio Attanasio & Erich Battistin & Hidehiko Ichimura, 2004. "What Really Happened to Consumption Inequality in the US?," NBER Working Papers 10338, National Bureau of Economic Research, Inc.
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Cited by:

  1. World Bank, 2006. "Making the New Indonesia Work for the Poor," World Bank Other Operational Studies 8172, The World Bank.
  2. Sumarto, Sudarno & de Silva, Indunil, 2013. "Poverty-growth-Inequality Triangle: The Case of Indonesia," MPRA Paper 57135, University Library of Munich, Germany.
  3. Sudishka Joshi & Tesfa Gebremedhin, 2010. "A Spatial Analysis of Poverty and Income Inequality in the Appalachian Region," Working Papers Working Paper 2010-15, Regional Research Institute, West Virginia University.
  4. M A B Siddique & Heru Wibowo & Yanrui Wu, 2014. "Fiscal Decentralisation and Inequality in Indonesia: 1999-2008," Economics Discussion / Working Papers 14-22, The University of Western Australia, Department of Economics.
  5. Daniel Suryadarma & Wenefrida Widyanti & Asep Suryahadi & Sudarno Sumarto, 2006. "From Access to Income : Regional and Ethnic Inequality in Indonesia," Development Economics Working Papers 22547, East Asian Bureau of Economic Research.
  6. Sumarto, Sudarno & De Silva, Indunil, 2014. "Being Healthy, Wealthy, and Wise: Dynamics of Indonesian Subnational Growth and Poverty," MPRA Paper 57824, University Library of Munich, Germany.
  7. durongkaveroj, wannaphong, 2014. "Growth or development: experience from Latin America," MPRA Paper 54481, University Library of Munich, Germany, revised 16 Mar 2014.
  8. Sumarto, Sudarno & Bazzi, Samuel, 2011. "Social Protection in Indonesia:Past Experiences and Lessons for the Future," MPRA Paper 57893, University Library of Munich, Germany.
  9. Indunil De Silva & Sudarno Sumarto, 2015. "Dynamics Of Growth, Poverty And Human Capital: Evidence From Indonesian Sub-National Data," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 40(2), pages 1-33, June.
  10. repec:rri:wpaper:201015 is not listed on IDEAS

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