Regional Economic Integration and its Impacts on Growth, Poverty and Income Distribution: The Case of Indonesia

Djoni Hartono (), D.S. Priyarsono, Tien Dung Nguyen and Mitsuo Ezaki
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D.S. Priyarsono: Bogor Agriculture University
Tien Dung Nguyen: Ministry of Trade, Vietnam
Mitsuo Ezaki: Nagoya University

No 200703, Working Papers in Economics and Development Studies (WoPEDS) from Department of Economics, Padjadjaran University

Abstract: Indonesia is facing the trade liberalization and regional economic integration with several free trade areas, i.e. bilateral FTA, regional FTA and multilateral FTA. The aim of this paper is to analyze the impact of those international relationships on Indonesian economic growth, poverty and income distribution. By using a Global Computable General Equilibrium (GCGE) model, we made eighteen simulations to analyze the current and the potential international relationship that is faced by Indonesia. Generally, Indonesia gains significant benefit in terms of real GDP, output and welfare except FTA with India. FTA also increases the household income of rural group higher than the urban group ones. Unskilled labor experiences more advantages than skilled labor and poor household gain more benefit than the rich household both in rural and urban areas. Those conditions imply that FTA potentially could be a solution for national poverty reduction.

Keywords: Economic integration; Indonesia (search for similar items in EconPapers)
JEL-codes: F15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp, nep-cwa, nep-dev and nep-sea
Date: 2007-03, Revised 2007-03

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Persistent link: http://EconPapers.repec.org/RePEc:unp:wpaper:200703

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