Abstract
The current positive trend of Indonesia’s economic growth has demonstrated that increasing income per capita is one of the economic prosperity indicators. One pillar of the increase in the income per capita of middle class is its surge to 56.5% in 2010 compared to that of in 2000 which only reached 20%, and it has brought Indonesia to be qualified as a middle-income country. It is believed that, one of the ways to reduce inequality in society is by encouraging economic growth and development of middle-class society. This study aims to analyze the profile of middle class household and its contribution on decreasing inequality in Indonesia using the data of National Survey of Social Economy (Susenas) from 2004 to 2012. By using Keynesian Consumption model and Lorenz Curve, the results showed that middle-class grouping by using the 20th and 80th percentile of income has a higher growth than that of the USD or portion average income approach. However, due to the relatively small contribution of middle class income growth in Indonesia to the economic growth, the changes on Indonesian middle class income is inelastic to the changes on national output.
Highlights
The term middle class is relatively and absolutely defined (Kharas, 2010)
The samples were middle-class households in 33 provinces in Indonesia, defined by two criteria: (1) the determination of the middle class by Kharas (2010) which defines the middle class household expenditure is between USD 10-100 per individual per month; and (2) middle-class grouping was made based on the criteria of 60 percent income in the middle or between the 20th and 80th percentile
Criteria determination for middle-class households as the samples was based on three methods comprising income criteria and the criteria of 60 percent of income in the middle or between the 20th and 80th percentile
Summary
The term middle class is relatively and absolutely defined (Kharas, 2010). Middle class is a social group with income ranging from 20th to 80th percentile and consumption distribution from 0.75 to 1.25 times of the average income per capita (Easterly, 2001; Birdsall et al, 2000; Kharas, 2010; Bhalla, 2009; Ncube et al, 2011). The middle class plays a distinctive role in economic thought (Kharas, 2010). Middle class is a source of all inputs required for the economic growth, and both the physical and human capital accumulation
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: Jurnal Ekonomi Pembangunan: Kajian Masalah Ekonomi dan Pembangunan
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
