Agricultural Demand Linkages and Growth Multiplier in Rural Indonesia
In a fast urbanizing Indonesia, the rural sector still plays an important role in the countrys economy. Although declining, the majority of the population still live and find employment in rural areas. However, rural areas lag behind urban areas in many aspects. As a result, around 80% of all the poor in the country are found in rural areas. Resolving this problem requires a clear and effective strategy to jump-start and sustain economic growth in rural areas. This study finds that the growth of the agricultural sector strongly induces the growth of the non-agricultural sector in rural areas. Although it has been fluctuating over time, it is estimated that, on average, one percent growth in the agricultural sector will induce 1.2% growth in the non-agricultural sector in rural areas. This finding vindicates the view that rising incomes in the agricultural sector stimulate demand for locally produced goods and services in rural areas, in particular those produced by the non-tradable sector. Formulated appropriately, a rural development strategy that develops the agricultural sector could provide a major impetus for achieving a fast growing and vibrant rural sector in Indonesia.
|Date of creation:||Jan 2006|
|Contact details of provider:|| Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200|
Web page: http://www.eaber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lewis, John P., 1976. "The new economics of growth: A strategy for India and the developing world : John W. Mellor a twentieth century fund study (Cornell University Press, Ithaca, NY, 1976) pp. xv+335," Journal of Development Economics, Elsevier, vol. 3(4), pages 390-393, December.
- Block, Steven A., 1999.
"Agriculture and economic growth in Ethiopia: growth multipliers from a four-sector simulation model,"
Blackwell, vol. 20(3), pages 241-252, May.
- Block, Steven A., 1999. "Agriculture and economic growth in Ethiopia: growth multipliers from a four-sector simulation model," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 20(3), May.
- Ravallion, Martin & Datt, Gaurav, 1996. "How Important to India's Poor Is the Sectoral Composition of Economic Growth?," World Bank Economic Review, World Bank Group, vol. 10(1), pages 1-25, January.
- Haggblade, Steven & Hazell, Peter & Brown, James, 1989. "Farm-nonfarm linkages in rural sub-Saharan Africa," World Development, Elsevier, vol. 17(8), pages 1173-1201, August.
- Haggblade, Steven & Hazell, Peter B. & Brown, James, 1988. "Farm-nonfarm linkages in rural sub-Saharan Africa," Policy Research Working Paper Series 6, The World Bank.
- Simphiwe, N., 2001. "Prospects For Rural Growth? Measuring Growth Linkages In A South African Smallholder Farming Area," Working Papers 18027, University of Pretoria, Department of Agricultural Economics, Extension and Rural Development.
- Datt, Gaurav & Ravallion, Martin, 1998. "Why Have Some Indian States Done Better Than Others at Reducing Rural Poverty?," Economica, London School of Economics and Political Science, vol. 65(257), pages 17-38, February.
- Datt, Gaurav & Ravallion, Martin, 1996. "Why have some Indian states done better than others at reducing rural poverty?," Policy Research Working Paper Series 1594, The World Bank.