Poverty, inequality and economic mobility in Indonesia

• Main Author: Martin, Thomas Ieuan
• Published: University of Essex 2013
• Subjects: 338.9598
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.580640

This thesis broadens our understanding of poverty, inequality and economic mobility in the context of a developing country by analysing the welfare of individuals in Indonesia over the last two decades. The analysis is split into three main periods, with very contrasting macroeconomic conditions: rampant economic growth under an authoritarian regime (1993-1997); an economic and political collapse following the East Asian Financial Crisis (1997-2000); and finally a recovery period in a new democratic era (2000-2007). In particular, we focus on investigating the robustness of poverty trends and associations, the chronic and transient nature of poverty, and the interaction between changes in inequality and economic mobility. Poverty trends emerging from repeated cross-sections are shown to be robust to the choice of poverty line, poverty measure, equivalence scale and regional price index, although some well-established poverty associations with education and region are not. Using longitudinal data we find that different methodological practices cause the relative importance of estimated chronic and transient poverty to vary substantially. Stable inequality in Indonesia over time is shown to be the net result of increasing income among poorer individuals and the re-ranking of individuals across the whole income distribution. Income changes during the crisis period were the most income equalising, while they were more dis-equalising in the democratic era. Together, findings will help policy makers, economists and other social scientists in general gain a better understanding of new measurement practices in describing welfare dynamics and how they can inform policy decisions. The results, while consistent with previous research, provide new insights into welfare in Indonesia from both cross-sectional and longitudinal perspectives.