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

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 decentra...

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Bibliographic Details
Published in:Bulletin of Indonesian economic studies 2014-09, Vol.50 (3), p.461-482
Main Authors: Miranti, Riyana, Duncan, Alan, Cassells, Rebecca
Format: Article
Language:English
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Summary: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.
ISSN:0007-4918
1472-7234
DOI:10.1080/00074918.2014.980377