Explaining the Regional Heterogeneity of Poverty: Evidence from Decentralized Indonesia

Sudarno Sumarto (), Marc Vothknecht and Laura Wijaya

MPRA Paper from University Library of Munich, Germany

Abstract: This study presents evidence from Indonesia on how the country’s recent periods of economic growth have contributed to poverty reduction at the regional level, with a particular emphasis on the role of decentralization. Over the past decade Indonesia has made significant progress in reducing poverty, from 23% of the population in 1999 to less than 12% in 2013. However, substantial differences in regional poverty are observed. In this paper, we discuss the factors that drive the evolution of poverty in a decentralized Indonesia, and relate kabupaten (district) performance in poverty reduction to a wide range of social, economic, and political characteristics within the area. The study finds gross domestic product (GDP) percapita to be one of the major driving forces behind the decline in regional poverty. Additionally, results from a panel data analysis covering the period of 2005 to 2010 show that poverty has decreased in particular in those kabupaten with (i) a larger share of local leaders with secondary education; (ii) a higher average educational attainment; (iii) an established local office for the coordination of poverty reduction initiatives (TKPKD); (iv) a higher share of fiscal revenues; and (v) a higher share of urban population. Furthermore, there appears to be a positive link between regional inequality and poverty, suggesting that a successful poverty reduction strategy requires both economic growth and sound social policies.

Keywords: Poverty; Decentralization; Economic Growth; Indonesia (search for similar items in EconPapers)
JEL-codes: I3 I32 I38 (search for similar items in EconPapers)
Date: 2014-03-11
New Economics Papers: this item is included in nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: Explaining the Regional Heterogeneity of Poverty: Evidence from Decentralized Indonesia
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