REGIONAL ECONOMIC INTEGRATION AND ITS IMPACTS ON GROWTH, POVERTY, AND INCOME DISTRIBUTION: THE CASE OF INDONESIA

Djoni Hartono, Dominicus Priyarsono, Tien Dung Nguyen and Mitsuo Ezaki

Review of Urban & Regional Development Studies, 2007, vol. 19, issue 2, 138-153

Abstract: Indonesia continually tries to open its economy through free trade areas (FTAs) on bilateral, regional, and multilateral bases. This paper discusses the impacts of FTAs on the Indonesian economy, particularly for economic growth, poverty, and income distribution. By using a Global Computable General Equilibrium (GCGE) model, we conducted the simulation analysis by setting eighteen scenarios for the ongoing and potential FTAs of different frameworks. Indonesia is found to benefit from joining in FTAs, except for the FTA with India. It is also implied that FTAs increase rural household income at higher rates than they increase urban household income. Moreover, FTAs' impacts are more favorable for unskilled workers than for skilled ones, and also for relatively poor households more than for rich households, both in urban and rural areas. In brief, FTAs provide Indonesia with income redistribution effects.

Date: 2007
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https://doi.org/10.1111/j.1467-940X.2007.00131.x

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Working Paper: Regional Economic Integration and its Impacts on Growth, Poverty and Income Distribution: The Case of Indonesia (2007)
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