2004 Fiscal Year Final Research Report Summary
The Poverty in Rural Indonesia and an Analysis of Its Causes
| Project/Area Number |
14402029
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| Research Category |
Grant-in-Aid for Scientific Research (B)
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| Allocation Type | Single-year Grants |
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| Section | 海外学術 |
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| Research Field |
Agro-economics
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| Research Institution | The International Centre for the Study of East Asian Development (2004)
Kobe University (2002-2003) |
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Principal Investigator |
HONDAI Susumu The International Centre for the Study of East Asian Development, Research Division, Research Professor, 研究部, 主席研究員 (70138569)
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| Co-Investigator(Kenkyū-buntansha) |
SHINTANI Masahiko Seinan Gakuin University, Faculty of Economics, Professor, 経済学部, 教授 (70069706)
TAKAHASHI Nobumasa Osaka Commerce University, Faculty of Economics, Lecturer, 経済学部, 非常勤講師 (00294249)
TAKADA Osamu Kobe University, Faculty of Agriculture, Professor, 農学部, 教授 (90171446)
YAMAGUCHI Mitoshi Kobe University, Graduate School of Economics, Professor, 大学院・経済学研究科, 教授 (90030684)
NAKAMURA Kazutoshi Nagasaki Prefectural University, Faculty of Economics, Lecturer, 経済学部, 講師 (40304084)
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| Project Period (FY) |
2002 – 2004
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| Keywords | A declining trend of labor share / Social accounting matrix / Characteristic of the poor households / Income disparity among islands / Educational levels and consumption / Interest rate and credit channels / Poverty between generations / Labor migration due to employment opportunity and income difference |
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| Research Abstract |
Income distribution can be analyzed from macro economic and micro economic points of view. An observation from a macro economic point of view shows a declining trend of labor share of value-added in the manufacturing sector over the last 20 years in Indonesia. This declining trend has been created by mainly surplus labor in the agricultural sector, labor saving technology in the manufacturing sector, and increasing wage rates in Indonesian economy. To turn around this trend of income distribution in Indonesian economy, Indonesian economy has to firstly reduce surplus labor in the agricultural sector either by improving agricultural labor productivity or by shifting agricultural labor forces to the non-agricultural sectors. An economy can increase labor share of value-added only after passing a turning point from a labor surplus to a labor shortage economy. A declining trend of labor share in Indonesian economy can be observed from a social accounting matrix (SAM), too. Based on SAM ana
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lysis, a real percapita consumption level declined from Rp204,000 in 1995 to Rp157,000 in 1998 and to Rp150,000 mainly due to price increase during the economic crisis. As a result, population below the poverty line increased temporarily.
Indonesian household social and economic survey can be used for analysis from a micro economic point of view. It shows that two third of households below the poverty lines are located in rural areas. Household consumption levels are mainly related to land holding situations, educational levels of household head, and family size, but not closely related to occupation, gender and age of household heads. In addition, marginal consumption expenditure with respect to a year of addition education is approximately 5 percent and the figure is almost same regardless of household heads' occupation. Marginal rate of return with respect to a year of addition education is very high and education is a very effective measure to reduce poverty in the long run. But, in reality, the educational levels of children from the low income households are likely to be low and then the characteristics of poor households will be passed over to the next generation. In the short run, the poverty will be alleviated by improving productivity of rural small enterprises and then expanding employment opportunity in rural areas. It is also important to make landless farmers to own land for reducing poverty in rural areas. Less
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