Poverty, Labour Markets and Trade Liberalization in Indonesia

Krisztina Kis-Katos and Robert Sparrow ()

No 7645, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We measure the effects of trade liberalization over the period of 1993-2002 on regional poverty levels in 259 Indonesian regions, and investigate the labour market mechanisms behind these effects. The identification strategy relies on combining information on initial regional labour and product market structure with the exogenous tariff reduction schedule over four three-year periods. We find that poverty reduced more in regions that were more strongly exposed to import tariff liberalization. Among the potential channels behind this effect, we highlight the formalization of the unskilled labour force and structural reallocation of labour. We also show that job formation and increases in unskilled wages were related to reductions in import tariffs on intermediate goods and not to reductions in import tariffs on final outputs. These results point towards increasing firm competitiveness as a driving factor behind the beneficial poverty effects.

Keywords: trade liberalization; labour markets; poverty; Indonesia (search for similar items in EconPapers)
JEL-codes: J13 O15 O24 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2013-09
New Economics Papers: this item is included in nep-sea
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Citations: View citations in EconPapers (4)

Published - published in: Journal of Development Economics, 2015, 117, 94-106

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Journal Article: Poverty, labor markets and trade liberalization in Indonesia (2015)
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