Growth, Inequality, and Poverty: An Analysis of Pro-Poor Growth in Indonesia
Abstract
In the concept of pro-poor growth, economic growth accompanied by fair income distribution will accelerate the rate of poverty reduction. By employing extensive data of household expenditures and other economic indicators, the study will examine the performance of economic growth in Indonesia whether it has been pro-poor over the period 2005-2013. We employ two methods in this article, Growth Incidence Curve (GIC) method, and Pro-Poor Growth Index (PPGI) method. By applying the GIC method, our empirical results indicate that economic growth in Indonesia has not been pro-poor during the observed period. The curve shows that the highest income population enjoys increased consumption more than the poorest population. Furthermore, PPGI method has revealed that economic growth, inequality, and an interaction term between economic growth and inequality have been significant to influence poverty incidence in Indonesia. Our empirical result also reveals that among manufacturing, agriculture, and services sector; it was manufacturing that has successfully reduced the number of the poor, while agriculture unexpectedly had a devastating impact on the number of poor people. The services sector, meanwhile, had not contributed to poverty alleviation. Furthermore, none of the government spending in education and health that significantly contributes to poverty alleviation.
Downloads
Download data is not yet available.
References
Baltagi, B. H. (1995) Econometric Analysis of Panel Data: Badi H. Baltagi. Chichester: Wiley.
Bourguignon, F. (2004) ‘The Poverty-Growth-Inequality Triangle’. Paris: Agence Francaise de Development.
Bridonneau, S. (2016) ‘What I have learnt about the use of Growth Incidence Curves: use them but stay critical’. Accessed 1 July 2017.
Christiansen, L. and L. Demery (2007) Down to Earth: Agriculture and Poverty Reduction in Africa. Washington: The World Bank.
Directorate General of Fiscal Balance-Indonesia (2013) ‘Realized Local Government Budget 2005-2013’. Jakarta, Ministry of Finance: Directorate General of Fiscal Balance.
Dollar, D. and A. Kraay (2002) ‘Growth is Good for the Poor’, Journal of Economic Growth 7(3): 195-225.
Dollar, D., T. Kleineberg and A. Kraay (2016) ‘Growth still is Good for the Poor’, European Economic Review 81(2016): 68-85.
Foster, M., A. Fozzard, F. Naschold, and T. Conway (2002) How, When, and Why does Poverty get Budget Priority Poverty Reduction Strategy and Public Expenditure in Five African Countries. London: Overseas Development Institute.
Haraguchi, N., C. F. C. Cheng, E. Smeets (2017) ‘The Importance of Manufacturing in Economic Development: Has this Changed?’, World Development: 1-23.
Hasan, R. and M. G. Quibria (2004) ‘Industry Matters for Poverty: A Critique of Agricultural Fundamentalism’ Kyklos Business Source Premier 57(2): 253-264.
Kakwani, N., E. M. Pernia. (2000) ‘What is Pro-Poor Growth?’, Asian Development Review 18(1): 1-16.
Kakwani, N., H. H. Son. (2003) ‘Pro-Poor Growth: Concepts and Measurement with Country Case Studies’, The Pakistan Development Review 42(4): 417-444.
Kakwani, N., H. H. Son. (2008) ‘Poverty Equivalent Growth Rate’, The Review of Income and Wealth 54(4): 643-655.
Kakwani, N., M. C. Neri and H.H.Son (2010) ‘Linkages between Pro-Poor Growth, Social Programs, and Labor Market:The Recent Brazilian Experience’, World Development 38(6): 881-894.
Klasen, S. (2008) ‘Economic Growth and Poverty Reduction: Measurement Issues using Income and Non-Income Indicators’, World Development 36(3): 420-445.
Lin, B. Q. (2003) ‘Economic Growth, Income Inequality, and Poverty Reduction in People’s Republic of China’, Asian Development Review 20(2): 105-124.
Maasoumi, E. and V. Mahmoudi (2013) ‘Robust Growth-Equity Decomposition of Change in Poverty: The Case of Iran (2000-2009)’, The Quarterly Review of Economic and Finance 53(2013): 268-276.
Montalvo, J. G. and M. Ravallion (2010) ‘The Pattern of Growth and Poverty Reduction in China’, Journal of Comparative Economics 38(2010): 2-16.
Nachrowi, N. D., H. Usman (2006) Pendekatan Populer dan Praktis Ekonometrika: Untuk Analisis Ekonomi dan Keuangan. Jakarta: Lembaga Penerbit Fakultas Ekonomi Universitas Indonesia.
Nayyar, G. (2005) ‘Growth and Poverty in Rural India: An Analysis of Inter-State Differences’, Economic and Political Weekly 40(16): 1631-1639.
Papyrakis, E. ‘Environmental Performance in Socially Fragmented Countries’, Environmental and Resiurce Economics 55(1): 119-140.
Perera, L. D. H. and G. H. Y. Lee (2013) ‘Have Economic Growth and Institutional Quality Contributed to Poverty and Inequality Reduction in Asia’, Journal of Asian Economics 27(2013): 71-86.
Potter, R. B. (2014) ‘Measuring Development: From GDP to HDI and Wider Approaches’, in V. Desai and R. B. Potter (eds) The Companion to Development Studies , pp 56-59. Oxon: Routledge.
Ravallion, M. (2001) ‘Growth, Inequality, and Poverty: Looking Beyond Averages’, in A. Shorrocks and R. V. D. Hoeven (eds) Prospects for Pro-Poor Economic Development, pp. 62-80. New York: Oxford University Press.
Ravallion, M. (2005) ‘A Poverty-Inequality Trade-off?’. Journal of Economic Inequality 2005(3): 169-181.
Ravallion, M. (2004) ‘Pro-Poor Growth: A Primer’, Policy Research Working Paper. Washington: World Bank.
Ravallion, M., G. Datt (1996) ‘How Important to India's Poor Is the Sectoral Composition of Economic Growth?’, The World Bank Economic Review 10(1): 1-25.
Ravallion, M., G. Datt (2009) ‘Has India’s Economic Growth Become More Pro-Poor in the Wake of Economic Reforms’, Policy Research Working Paper. Washington: World Bank.
Ravallion, M., S. Chen (1997) ‘What Can New Survey Data Tell Us about Recent Changes in Distribution and Poverty’, The World Bank Economic Review 11(2): 357-382.
Ravallion, M., S. Chen (2003) ‘Measuring pro-poor growth’ Economic Letters 78(1): 93-99.
Ray, D. (1998) Development Economics. New Jersey: Princeton University Press.
Selden, T. M. and M. J. Wasylenko (1995) ‘Public Spending and the Poor: Theory and Evidence’, in D. v. d Walle and K. Nead (eds). Measuring the Distributional Effects of Public Education in Peru, pp 154-186. Washington: World Bank.
Silva, I. D. (2016) ‘Why Growth and Redistribution Matter for Poverty Reduction: Evidence from Sri Lanka on the Elusive Quest for Pro-Poor Growth’, Journal of International Development 28: 1272-1293.
Son, H. H. (2007) ‘Pro-Poor Growth. Concepts and Measures’, ERD Technical Note Series 22: 1-23.
Statistic Indonesia (2013) ‘Calculation and Analysis of Indonesian Macro Poverty in The year 2013’. Jakarta, CBS: Statistic Indonesia.
Suryahadi, A., D. Suryadarma, S. Sumarto (2009) ‘The Effects of Location and Sectoral Components of Economic Growth on Poverty: Evidence from Indonesia’, Journal of Development Economics 89(2009): 109-117.
Szirmai, A., B. Verspagen (2015) ‘Manufacturing and economic growth in developing countries, 1950-2005’, Structural Change and Economic Dynamics 34: 46-59.
Thirlwall, A. P. (2014) ‘Development and Economic Growth’, in V. Desai and R. B. Potter (eds) The Companion to Development Studies , pp 25-58. Oxon: Routledge
Thurlow, J. and P. Wobst (2005) ‘The Role of Agriculture in Pro-Poor Growth: Lessons from Zambia’, in M. Grimm, S. Klasen and A. McKay (eds) Determinants of Pro-Poor Growth: Analytical Issues and Findings from Country Cases, pp 219-241. New York: Palgrave MacMillan.
Todaro, M. P., S. C. Smith (2009) Economic Development. Harlow: Pearson Education Limited.
United Nations (2017) ‘Learning to Live Together’, Accessed 16 July 2017
Warr, P. (2006) ‘Poverty and Growth in Southeast Asia’, ASEAN Economic Bulletin 23(3): 279-302.
White, H. (2014) ‘The Measurement of Poverty’, in V. Desai and R. B. Potter (eds) The Companion to Development Studies , pp 60-67. Oxon: Routledge.
Wilhelm, V. and I. Fiestas (2005) ‘Exploring the Link between Public Spending and Poverty Reductions – Lessons from the 90s’, WBI Working Papers Promoting Knowledge and Learning for a better World. Washington, DC: World Bank.
Wodon, Q. T. (2009) ‘Growth, Poverty, and Inequality: A Regional Panel for Bangladesh’, Policy Research Working paper 2072. Washington: World Bank.
World Bank (2005) ‘Introduction to Poverty Analysis’, Washington: World Bank Institute.
World Bank (2013) ‘ Spending More or Spending Better: Improving Education Financing in Indonesia’, Jakarta: The World Bank Office.
World Bank (2015) ‘World Bank Forecasts Global Poverty to Fall Below 10% for First Time’. Accessed 16 July 2017 http://www.worldbank.org/en/news/press-release/2015/10/04/ world-bank-forecasts-global-poverty-to-fall-below-10-for-first-time-major-hurdles-remain-in-goal-to-end-poverty-by-2030
World Bank (2017) ‘The World Bank Data: Economy and Growth’. Accessed 2 August 2017 < https://data.worldbank.org/indicator>.
Zaman, K., M.M. Khan and M. Ahmad (2010) ‘Assessing the Poverty Bias of Growth in Agriculture Sector: Evidence from Pakistan’, International Journal of Trade, Economics and Finance 1(3): 303-308.
Bourguignon, F. (2004) ‘The Poverty-Growth-Inequality Triangle’. Paris: Agence Francaise de Development.
Bridonneau, S. (2016) ‘What I have learnt about the use of Growth Incidence Curves: use them but stay critical’. Accessed 1 July 2017
Christiansen, L. and L. Demery (2007) Down to Earth: Agriculture and Poverty Reduction in Africa. Washington: The World Bank.
Directorate General of Fiscal Balance-Indonesia (2013) ‘Realized Local Government Budget 2005-2013’. Jakarta, Ministry of Finance: Directorate General of Fiscal Balance.
Dollar, D. and A. Kraay (2002) ‘Growth is Good for the Poor’, Journal of Economic Growth 7(3): 195-225.
Dollar, D., T. Kleineberg and A. Kraay (2016) ‘Growth still is Good for the Poor’, European Economic Review 81(2016): 68-85.
Foster, M., A. Fozzard, F. Naschold, and T. Conway (2002) How, When, and Why does Poverty get Budget Priority Poverty Reduction Strategy and Public Expenditure in Five African Countries. London: Overseas Development Institute.
Haraguchi, N., C. F. C. Cheng, E. Smeets (2017) ‘The Importance of Manufacturing in Economic Development: Has this Changed?’, World Development: 1-23.
Hasan, R. and M. G. Quibria (2004) ‘Industry Matters for Poverty: A Critique of Agricultural Fundamentalism’ Kyklos Business Source Premier 57(2): 253-264.
Kakwani, N., E. M. Pernia. (2000) ‘What is Pro-Poor Growth?’, Asian Development Review 18(1): 1-16.
Kakwani, N., H. H. Son. (2003) ‘Pro-Poor Growth: Concepts and Measurement with Country Case Studies’, The Pakistan Development Review 42(4): 417-444.
Kakwani, N., H. H. Son. (2008) ‘Poverty Equivalent Growth Rate’, The Review of Income and Wealth 54(4): 643-655.
Kakwani, N., M. C. Neri and H.H.Son (2010) ‘Linkages between Pro-Poor Growth, Social Programs, and Labor Market:The Recent Brazilian Experience’, World Development 38(6): 881-894.
Klasen, S. (2008) ‘Economic Growth and Poverty Reduction: Measurement Issues using Income and Non-Income Indicators’, World Development 36(3): 420-445.
Lin, B. Q. (2003) ‘Economic Growth, Income Inequality, and Poverty Reduction in People’s Republic of China’, Asian Development Review 20(2): 105-124.
Maasoumi, E. and V. Mahmoudi (2013) ‘Robust Growth-Equity Decomposition of Change in Poverty: The Case of Iran (2000-2009)’, The Quarterly Review of Economic and Finance 53(2013): 268-276.
Montalvo, J. G. and M. Ravallion (2010) ‘The Pattern of Growth and Poverty Reduction in China’, Journal of Comparative Economics 38(2010): 2-16.
Nachrowi, N. D., H. Usman (2006) Pendekatan Populer dan Praktis Ekonometrika: Untuk Analisis Ekonomi dan Keuangan. Jakarta: Lembaga Penerbit Fakultas Ekonomi Universitas Indonesia.
Nayyar, G. (2005) ‘Growth and Poverty in Rural India: An Analysis of Inter-State Differences’, Economic and Political Weekly 40(16): 1631-1639.
Papyrakis, E. ‘Environmental Performance in Socially Fragmented Countries’, Environmental and Resiurce Economics 55(1): 119-140.
Perera, L. D. H. and G. H. Y. Lee (2013) ‘Have Economic Growth and Institutional Quality Contributed to Poverty and Inequality Reduction in Asia’, Journal of Asian Economics 27(2013): 71-86.
Potter, R. B. (2014) ‘Measuring Development: From GDP to HDI and Wider Approaches’, in V. Desai and R. B. Potter (eds) The Companion to Development Studies , pp 56-59. Oxon: Routledge.
Ravallion, M. (2001) ‘Growth, Inequality, and Poverty: Looking Beyond Averages’, in A. Shorrocks and R. V. D. Hoeven (eds) Prospects for Pro-Poor Economic Development, pp. 62-80. New York: Oxford University Press.
Ravallion, M. (2005) ‘A Poverty-Inequality Trade-off?’. Journal of Economic Inequality 2005(3): 169-181.
Ravallion, M. (2004) ‘Pro-Poor Growth: A Primer’, Policy Research Working Paper. Washington: World Bank.
Ravallion, M., G. Datt (1996) ‘How Important to India's Poor Is the Sectoral Composition of Economic Growth?’, The World Bank Economic Review 10(1): 1-25.
Ravallion, M., G. Datt (2009) ‘Has India’s Economic Growth Become More Pro-Poor in the Wake of Economic Reforms’, Policy Research Working Paper. Washington: World Bank.
Ravallion, M., S. Chen (1997) ‘What Can New Survey Data Tell Us about Recent Changes in Distribution and Poverty’, The World Bank Economic Review 11(2): 357-382.
Ravallion, M., S. Chen (2003) ‘Measuring pro-poor growth’ Economic Letters 78(1): 93-99.
Ray, D. (1998) Development Economics. New Jersey: Princeton University Press.
Selden, T. M. and M. J. Wasylenko (1995) ‘Public Spending and the Poor: Theory and Evidence’, in D. v. d Walle and K. Nead (eds). Measuring the Distributional Effects of Public Education in Peru, pp 154-186. Washington: World Bank.
Silva, I. D. (2016) ‘Why Growth and Redistribution Matter for Poverty Reduction: Evidence from Sri Lanka on the Elusive Quest for Pro-Poor Growth’, Journal of International Development 28: 1272-1293.
Son, H. H. (2007) ‘Pro-Poor Growth. Concepts and Measures’, ERD Technical Note Series 22: 1-23.
Statistic Indonesia (2013) ‘Calculation and Analysis of Indonesian Macro Poverty in The year 2013’. Jakarta, CBS: Statistic Indonesia.
Suryahadi, A., D. Suryadarma, S. Sumarto (2009) ‘The Effects of Location and Sectoral Components of Economic Growth on Poverty: Evidence from Indonesia’, Journal of Development Economics 89(2009): 109-117.
Szirmai, A., B. Verspagen (2015) ‘Manufacturing and economic growth in developing countries, 1950-2005’, Structural Change and Economic Dynamics 34: 46-59.
Thirlwall, A. P. (2014) ‘Development and Economic Growth’, in V. Desai and R. B. Potter (eds) The Companion to Development Studies , pp 25-58. Oxon: Routledge
Thurlow, J. and P. Wobst (2005) ‘The Role of Agriculture in Pro-Poor Growth: Lessons from Zambia’, in M. Grimm, S. Klasen and A. McKay (eds) Determinants of Pro-Poor Growth: Analytical Issues and Findings from Country Cases, pp 219-241. New York: Palgrave MacMillan.
Todaro, M. P., S. C. Smith (2009) Economic Development. Harlow: Pearson Education Limited.
United Nations (2017) ‘Learning to Live Together’, Accessed 16 July 2017
Warr, P. (2006) ‘Poverty and Growth in Southeast Asia’, ASEAN Economic Bulletin 23(3): 279-302.
White, H. (2014) ‘The Measurement of Poverty’, in V. Desai and R. B. Potter (eds) The Companion to Development Studies , pp 60-67. Oxon: Routledge.
Wilhelm, V. and I. Fiestas (2005) ‘Exploring the Link between Public Spending and Poverty Reductions – Lessons from the 90s’, WBI Working Papers Promoting Knowledge and Learning for a better World. Washington, DC: World Bank.
Wodon, Q. T. (2009) ‘Growth, Poverty, and Inequality: A Regional Panel for Bangladesh’, Policy Research Working paper 2072. Washington: World Bank.
World Bank (2005) ‘Introduction to Poverty Analysis’, Washington: World Bank Institute.
World Bank (2013) ‘ Spending More or Spending Better: Improving Education Financing in Indonesia’, Jakarta: The World Bank Office.
World Bank (2015) ‘World Bank Forecasts Global Poverty to Fall Below 10% for First Time’. Accessed 16 July 2017 http://www.worldbank.org/en/news/press-release/2015/10/04/ world-bank-forecasts-global-poverty-to-fall-below-10-for-first-time-major-hurdles-remain-in-goal-to-end-poverty-by-2030
World Bank (2017) ‘The World Bank Data: Economy and Growth’. Accessed 2 August 2017 < https://data.worldbank.org/indicator>.
Zaman, K., M.M. Khan and M. Ahmad (2010) ‘Assessing the Poverty Bias of Growth in Agriculture Sector: Evidence from Pakistan’, International Journal of Trade, Economics and Finance 1(3): 303-308.
Published
2018-08-13
How to Cite
PERMADI, Yudistira Andi.
Growth, Inequality, and Poverty: An Analysis of Pro-Poor Growth in Indonesia.
Jurnal Ekonomi Kuantitatif Terapan, [S.l.], p. 216-233, aug. 2018.
ISSN 2303-0186.
Available at: <https://ojs.unud.ac.id/index.php/jekt/article/view/35124>. Date accessed: 19 nov. 2024.
doi: https://doi.org/10.24843/JEKT.2018.v11.i02.p08.
Section
Articles
Certificate
