The sectoral structure of poverty during an adjustment period: Evidence for Indonesia in the mid-1980s

Abstract

During the difficult macroeconomic adjustment period of the mid-1980s, Indonesia was able to maintain the momentum of its progress in reducing aggregate poverty. This paper examines the structure of poverty by sector of employment in Indonesia and how this evolved during 1984–1987. A range of poverty measures and decomposition techniques are employed. Gains within the rural sector are found to have been quantitatively important, particularly in Java where there was reasonable growth in both farm and wage incomes associated with crop diversification and continued growth in off-farm employment. Although the aggregate distribution of consumption changed little around its growing mean, substantial intrasectoral shifts in distribution occured, such that sector growth rates and rates of poverty alleviation were virtually uncorrelated over the period.