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Economic growth and poverty reduction in Indonesia before and after the asian financial crisis

Author

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  • Asep Suryahadi
  • Gracia Hadiwidjaja
  • Sudarno Sumarto

Abstract

This paper assesses the relationship between poverty reduction and economic growth in Indonesia before and after the Asian financial crisis. The annual rate of poverty reduction slowed significantly in the post-crisis period. However, the trend in the growth elasticity of poverty indicates that the power of each percentage point of economic growth to reduce poverty did not change much between the two periods. In both, service sector growth made the largest contribution to poverty reduction in both rural and urban areas. Industrial sector growth largely became irrelevant for poverty reduction in the post-crisis period even though the sector contributed the second-largest share of GDP. Agricultural sector growth, mean-while, remained important, but in rural areas only. The findings suggest the need to formulate an effective strategy to promote sectoral growth in order to speed up the pace of poverty reduction.

Suggested Citation

  • 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.
    • Handle: RePEc:taf:bindes:v:48:y:2012:i:2:p:209-227
    DOI: 10.1080/00074918.2012.694155
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    References listed on IDEAS

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    1. Bird, Kelly & Manning, Chris, 2008. "Minimum Wages and Poverty in a Developing Country: Simulations from Indonesia's Household Survey," World Development, Elsevier, vol. 36(5), pages 916-933, May.
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    3. C. Peter Timmer, 2004. "The road to pro-poor growth: the Indonesian experience in regional perspective," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 40(2), pages 177-207.
    4. Hyun H. Son & Nanak Kakwani, 2004. "Economic growth and poverty reduction: initial conditions matter," Working Papers 2, International Policy Centre for Inclusive Growth.
    5. Neil McCulloch, 2008. "Rice Prices And Poverty In Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 44(1), pages 45-64.
    6. Armida Alisjahbana & Chris Manning, 2006. "Labour market dimensions of poverty in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 42(2), pages 235-261.
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