Understanding the Relationships between Development Factors and Regional Poverty: What Have We Learned from Indonesia?

ABSTRACT

This article examines factors that are associated with disparities in regional poverty in Indonesia during the second half of the decentralization decade, from 2006 to 2011. This study finds that types of income growth matter for poverty reduction, particularly growth in income from the nonfood crops and services sectors. Provision of clear water is significant for poverty reduction too. The research also finds that distance from the capital city of Jakarta matters, the longer distance contributes to an increase in poverty rates. Nevertheless, there have been no robust significant relationships between in-migration, out-migration, intergovernmental transfer, and poverty.

KEYWORDS:

• Asia
• economic growth
• Indonesia
• regional development
• regional poverty

Acknowledgement

The original version of this article was prepared for the Tim Nasional Percepatan Penanggulangan Kemiskinan in the Indonesian Vice President’s Office as part of the USAID Support for Economic Analysis Development in Indonesia (SEADI) Project managed by the Boston Institute for Development Economies (BIDE). The author would like to thank the SEADI project for its support. The author particularly thanks Professor Gustav Papanek, Dr. Moekti Soejachmoen, and Dr. Tim Buehrer for useful advice and data assistance provided on this project.

Notes

1. For example, Balisacan et al. (2003) are the first who have included a natural resources variable, as proxied by oil and gas, whereas none of the other studies of single countries did that.

2. Poverty measurement in Indonesia is calculated using the basic needs approach based on per capita consumption. The poverty line or a threshold categorizing whether someone is poor is based on the monetary value of consumption necessary to fulfil the basic needs of food and nonfood items. The benchmark for defining poverty is if a person can fulfil a 2,100 calorie intake per day, as required by the 1978 National Workshop on Food and Nutrition.