Sudarno Sumarto

Poverty and Vulnerability in Indonesia Before and After the Economic Crisis

It is well known that the economic crisis in Indonesia has caused the poverty rate to increase significantly. The present study finds, not only that the poverty rate increased significantly, but also that much of the increase was due to a large increase in the chronic poor category (i.e. the poor who have expected consumption below the poverty line and most likely will stay poor in the near future). Furthermore, the present study also finds that the proportion of households that have high vulnerability to poverty has more than doubled since the economic crisis. As a result, the proportion of the total vulnerable group (the current poor plus the high vulnerability group) has jumped from less than one-fifth of the population before the crisis to more than one-third after the crisis. Copyright 2003 East Asian Economic Association..

Improving Student Performance in Public Primary Schools in Developing Countries: Evidence from Indonesia

Abstract This paper investigates the correlates of student performance in mathematics and dictation tests among schoolchildren in Indonesia. This is the first such study to use a new nationally representative sample of Indonesian primary‐school students. Our dataset includes unique data on teacher absenteeism collected through direct observation, the first ever in Indonesia. We find that teacher absenteeism is indeed a significantly negative correlate of student performance, while quality of school facilities predicts better performance. We also find a significant non‐monotonic concave relationship between the pupil–teacher ratio and student’s mathematics performance. Finally, we discuss the policy implications of the results.

MINIMUM WAGE POLICY AND ITS IMPACT ON EMPLOYMENT IN THE URBAN FORMAL SECTOR

Since the late 1980s, minimum wages have become an important plank of the Indonesian governments labour policy. Their levels have increased faster in real terms than those of average wages and per capita gross domestic product and, as a result, minimum wages have become binding for the majority of formal sector workers. This study finds that the imposition of minimum wages has a negative and statistically significant impact on employment in the urban formal sector. The disemployment impact is greatest for female, young and less educated workers, while the employment prospects of white-collar workers are enhanced by increases in minimum wages. Some workers who lose jobs in the formal sector and have to relocate to the informal sector face lower earnings and poorer working conditions.

Safety Nets or Safety Ropes? Dynamic Benefit Incidence of Two Crisis Programs in Indonesia

Abstract We extend the standard concept of static benefit incidence to dynamic benefit incidence ––the relationship between program benefits and changes in household expenditures. Using panel data we compare the static and dynamic benefit incidence of two programs: sales of subsidized rice targeted on administrative criteria and a set of public employment schemes based on self-selection targeting. Program design appears to have made a substantial difference in both static and dynamic benefit incidence. The employment creation schemes were much more responsive to expenditure shocks than were sales of subsidized rice. For instance, a household from the middle quintile of expenditures in the pre-crisis survey period (May 1997) who suffered the worst quintile shock was four times more likely to have participated in the employment creation program than a similar household with a positive shock but only one and a half times more likely to receive subsidized rice. Using the observed pattern of static and dynamic benefit incidence to compare the two programs and a uniform transfer, we show that if the middle-income households are sufficiently risk averse the additional insurance value of programs with superior dynamic benefit incidence can alter the median voter outcome in favor of more targeted programs.

Economic Growth and Poverty Reduction in Indonesia Before and After the Asian Financial Crisis

This paper assesses the relationship between poverty reduction and economic growth in Indonesia before and after the Asian financial crisis. The annual rate of poverty reduction slowed significantly in the post-crisis period. However, the trend in the growth elasticity of poverty indicates that the power of each percentage point of economic growth to reduce poverty did not change much between the two periods. In both, service sector growth made the largest contribution to poverty reduction in both rural and urban areas. Industrial sector growth largely became irrelevant for poverty reduction in the post-crisis period even though the sector contributed the second-largest share of GDP. Agricultural sector growth, mean-while, remained important, but in rural areas only. The findings suggest the need to formulate an effective strategy to promote sectoral growth in order to speed up the pace of poverty reduction.

The Relationship Between Chronic Poverty and Household Dynamics: Evidence from Indonesia

The composition of households frequently change due to births, deaths, divorces, marriages, the departure of children from home, and other compositional changes. Consequently, a large number of people undergo some fundamental change in household arrangements during relatively short periods of time. However, using data from Indonesia, this study finds that change in household composition is not a major cause of chronic poverty. Similarly, it finds no evidence that households change their composition to cope with negative shocks. Nevertheless, the study confirms that the larger the number of household members, the higher the probability that a household is chronically poor. Comparing different types of household compositions, households with a single female without children have the lowest probability of being either chronically poor or vulnerable, while single male households with or without children have the highest probability of being vulnerable. Frequent changes in household compositions imply that the use of household as the unit of analysis for poverty may undermine, or at least complicate, the conceptualization and measurement of chronic poverty. This also implies that the problem of targeting social protection programs not only relates to implementation, but also has some conceptual roots.

Governance and Poverty Reduction: Evidence from Newly Decentralized Indonesia.

This study is the first attempt to systematically examine the impact of bad governance practices in Indonesia on poverty reduction. Indonesia is a country that has endured bad governance for a long period, but also has sustained significant poverty reduction. Prior to the onset of the economic crisis in mid 1997, the problem of bad governance in Indonesia was apparent but mostly ignored because it was compensated by high economic growth. The advent of the economic crisis, however, has highlighted the seriousness of the problem. This study focuses on the impact of bad governance on the poor, the people who are most vulnerable to the impact of bad governance. By assembling scattered anecdotal evidence on how past and current practices of bad governance in Indonesia have hurt the poor, this study shows that the adverse impact of bad governance on the poor is real, systematically affects many people, and undermines the efforts to reduce poverty in the country. More systematic evidence on how bad governance affects poverty reduction indicates that indeed regions that practice better governance experience faster poverty reduction and vice versa.

A Reassessment of Inequality and its Role in Poverty Reduction in Indonesia

This study provides an overview of inequality trends in Indonesia for the period from 1984 to 2002. Different from previous studies on inequality in Indonesia, we use data on household consumption expenditure that takes into account price differentials across regions. We found that, although all measures indicate a decrease in inequality during the economic crisis, it actually increased for those below the poverty line. We also found that because inequality during the peak of the crisis in 1999 was at its lowest level in 15 years, the poverty rate decreased very rapidly during the recovery between 1999 and 2002.

Indonesia’s Social Protection during and after the Crisis

Before the onset of the economic crisis in mid-1997, Indonesia was one of the most rapidly growing economies in the world. This rapid growth had generated an unprecedented reduction in poverty within a remarkably short period of time.2 Between 1970 and 1996, absolute poverty fell by around 50 percentage points, accompanied by substantial gains in education and health standards. In the first half of the 1990s, GDP grew at an average annual rate of 7 per cent, and the poverty rate fell dramatically from 32.7 per cent in 1990 to 17.4 per cent by 1996 (Suryadarma et al., 2005).

The Measurement and Trends of Unemployment in Indonesia: The Issue of Discouraged Workers

This study provides an overview of the concepts used to measure unemployment in Indonesia and their consequences for the measured unemployment trends. One finding shows that BPSs decision in 2001 to relax the definition of labor force by including discouraged workers has resulted in an artificially high open unemployment rate and disguises the actual decline in traditionally-measured open unemployment rates post-crisis. Another finding indicates that discouraged workers in Indonesia are not confined only to the poor and those who are denied access to the proper job market. We recommend that, if Indonesia still wants to utilize a broader definition of the labor force, the measurement of open unemployment should adhere to the ILOs recommendation of only including those discouraged workers who are still willing to work. The discouraged workers who are unwilling to work should be left in the out of labor force category.