A Regional Analysis of Poverty, Inequality, and Growth in Indonesia, 1984-99

This paper uses six nationally representative household consumption surveys to develop successive poverty profiles for Indonesia over a fifteen-year period of sustained high growth followed by rapid contraction. Adopting a ‘cost-of-basic-needs’ approach to poverty determination (an approach particularly suited to measures of absolute poverty), this paper develops price indices and calculates poverty lines from unit value data, an oft neglected source of information. The summary findings confirm that Indonesia has witnessed broadbased gains in poverty reduction over the period 1984-96 and then a dramatic reversal during the recent financial crisis. These summary findings, however, mask substantial diversity in growth, inequality, and poverty change across Indonesian regions and so subsequent analysis focuses on the links between growth, inequality, and changes in poverty at the regional level. As opposed to previous studies of poverty change that have used short panels of cross-national data to identify the relationship between growth and poverty, this study employs a longer panel for a single country.../...