From Low Income, High Poverty to High-Income, No Poverty? An Optimistic View of the Long-Run Evolution of Poverty in Indonesia By International Poverty Lines, 1984–2030

Indonesia has achieved well-documented and drastic improvements in average incomes and in the reduction of poverty. Much research has discussed this progress. This paper adds to the literature with a new perspective. We discuss poverty in Indonesia using the international poverty lines ($1.25, $2 and we add $10/day). We generate historic estimates of poverty and make projections based on various growth and inequality trends. We find that Indonesia has the potential to attain high-income country status in a decade or so and at the same time, the potential to end $1.25/day and $2/day poverty but this would require favourable changes in distribution. Looking ahead, the end of poverty in Indonesia may be accompanied by a large proportion of the population vulnerable to poverty for some considerable time to come, suggesting public policy priorities may need to balance insurance and risk management mechanisms with more ‘traditional’ poverty policy. We also find, in contrast to national poverty line analysis, that poverty by the various international poverty lines, is considerably more urbanised,with more than half the poor residing in urban areas currently and the urban proportion of total poverty likely to rise further in the years ahead.