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

Riyana MIRANTI, Alan Duncan, Rebecca Cassells

    Research output: Contribution to journalArticle

    5 Citations (Scopus)

    Abstract

    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.
    Original languageEnglish
    Pages (from-to)461-482
    Number of pages22
    JournalBulletin of Indonesian Economic Studies
    Volume50
    Issue number3
    DOIs
    Publication statusPublished - 2014

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    decentralization
    Indonesia
    poverty
    elasticity
    panel data
    consumption
    Poverty
    Consumption inequality
    Consumption growth
    Decentralization
    income
    Elasticity
    rate

    Cite this

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    abstract = "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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    Revisiting the Impact of Consumption Growth and Inequality on Poverty in Indonesia during Decentralisation. / MIRANTI, Riyana; Duncan, Alan; Cassells, Rebecca.

    In: Bulletin of Indonesian Economic Studies, Vol. 50, No. 3, 2014, p. 461-482.

    Research output: Contribution to journalArticle

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    AB - 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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