Slideshare pro poor growth

Atik Mar’atis Suhartini
(Statistics Institute-Statistics of Indonesia)
Nunung Nuryartono, Ph. D.
(Department of Economics, Faculty of Economics, Bogor
Agricultural University)
Lukytawati Anggraeni, Ph. D.
(Department of Economics, Faculty of Economics, Bogor
Agricultural University)
3rd
IRSA Institute, Padang, July, 20-21, 2011
Pro Poor Growth at Province Level in Indonesia
PRO POOR GROWTH AT PROVINCE LEVELPRO POOR GROWTH AT PROVINCE LEVEL
IN INDONESIAIN INDONESIA

DiscussionDiscussion
pointpoint
1. Introduction
2. Literature Study
3. Research Method
4. Result and Discussion
5. Conclusion and Recommendation
PRO POOR GROWTH AT PROVINCE LEVEL IN INDONESIAPRO POOR GROWTH AT PROVINCE LEVEL IN INDONESIA

1.1.
IntroductionIntroduction
Backgrounds
- Main problem in MTD 2005-2009: poverty and inequality.
- Poverty (P0) decreased (18.2%/2002 became 14.15%/2009), but
the targets of MTD: 8.2% and MDGs: ± 7%. Gini index tends to
increase. Grafik P0 dan Gini.ppt
- Pro poor growth: the growth strategy that drives the income
increase of the poor, improve welfare and more equal income
distribution (equity aspects); accordingly, these aspects strengthen
the growth impact to poverty reduction (Grimm, et al., 2007;
Kakwani and Pernia, 2000).
- Poverty phenomenon at regional level (province): increasing trend
in North Sulawesi, Gorontalo, Papua, and West Papua; though,
nationally, the trend in 2009 decreased compared to that of
2008.

Research Purposes
To analyze the dynamics of economic
growth, income distribution, and
poverty at province level in Indonesia.
To analyze the growth and
distribution effects to poverty changes
at province level in Indonesia.
To analyze pro poor growth degree at
province level in Indonesia
To analyze the factors that influence
pro poor growth at province level in
Indonesia

PRO POOR GROWTHPRO POOR GROWTH TINGKAT PROVINSI DI INDONESIATINGKAT PROVINSI DI INDONESIA
Theoretical Review
2. Literature Study2. Literature Study
Various references explain that economic growth is necessary
condition for poverty alleviation (Tambunan, 2009; Todaro and
Smith, 2006; Siregar and Wahyuniarti, 2007).
Pro poor growth is a reciprocal relationship between growth, poverty
and inequality . Pro poor growth charts according to Bourguignon
(2004) as follows:

Poor People
3. Increasing income percapita, more equal
income distribution
Picture 2. Poverty Changes due to growth effects and
distribution effects

PRO POOR GROWTHPRO POOR GROWTH TINGKAT PROVINSI DI INDONESIATINGKAT PROVINSI DI INDONESIA
Empirical Review
1. Kakwani, Khandker, dan Son (2003) : economic growth in Korea is
more pro poor growth rather than in Thailand.
2. Nunez dan Espinosa (2005): measuring pro poor growth degree
by PEGR in Colombia at 1996-2004. only growth in 2001 and
2003 are pro poor growth, while in other periodes are anti pro
poor growth.
3. Siregar dan Wahyuniarti (2007): prove that economic growth
affects the decrease in number of poor people in Indonesia by
panel data regression.

Research FrameworkResearch Framework
Picture 1. Research FrameworkPicture 1. Research Framework
Problems:
1. Poverty rate is below the targets of MTDP 2005-2009 and MDGs. 2. Gini index
tends to increase. 3. Poverty rate varies at province level
Description of poverty at
province level
Poverty Equivalent
Growth Rate (PEGR)
Pro Poor Growth
indicators
Shapley
Decomposition of
Poverty
Growth effects Distribution
effects
Factors that influence pro poor growth
Panel Data Regression
Pro Poor Growth analysis at province level in Indonesia
Policy implication

3. Research Method3. Research Method
Types and Source of Data
- Time period: 2005-2009 in 33 provinces.
- Data: annual consumption module of national socio-
economic survey 2005-2009; and secondary data
originated from Statistics of Indonesia and the Ministry of
the Finance of the Republic if Indonesia used in this study.

3. Research3. Research
MethodMethodAnalysis Methods
1. Descriptive analysis is used to analyze the dynamics of economic
growth, income distribution and poverty
to describe the dynamics of economic growth, income distribution,
and poverty during research time period at province level.
2. Shapley Decomposition of Poverty: growth and distribution effects
-1- -2-
-1- = growth effect
-2- = distribution effect
= poverty change
= normalization form of if there is a change in mean income
from year t towards year s, for t≠s and t,s = 1,2






−+−+





−+−=∆ )),(),(()),(),((
2
1
)),(),(()),(),((
2
1
1
2
121
1
2
2
1
2
121
2
1
2 α
µ
µ
ααα
µ
µ
α
µ
µ
ααα
µ
µ z
PzPzP
z
P
z
PzPzP
z
PP
P∆
),( α
µ
µ
s
t
i
z
P

3. Research3. Research
MethodMethod3. Measurements of pro poor growth degree with PEGR
PEGR is one of the methods used to measure the economic growth
benefit degree for the poor.
: total elasticity to poverty
: economic growth elasticity to poverty
: actual economic growth
PEGR classifications:
--- neutral growth
--- pro poor growth
--- Not pro poor growth
--- anti pro poor growth
γηδγ ˆ)ˆ/ˆ(ˆ*
==PEGR
δˆ
γˆ
ηˆ
γγ ˆ*ˆ =
γγ ˆ*ˆ >
γγ ˆ*ˆ0 <<
0*ˆ <γ

3. Research Method3. Research Method
4. Factors that influence pro poor growth using data panel
regression analysis
MISKINit = Poor people in province i year t.
TANIit = Agricultural productivity in province i year t.
INV_PEMit = Government investment spending in province i year t.
RLSit = Mean of school in province i year t.
RLSPit = Mean of school for girls in province i year t.
RLSLit = mean of school for boys in province i year t.
GINIit = Gini index in province i year t.
PDDKit = Population in province i year t.
βj = Estimated parameter, j = 0, 1, 2, 3, 4, 5.
αi = Individual effect province i
µt = Time effect year t
uit = Error component.
itititititittiit uKPDDLnGiniLnRLSPEMLnINVLnTANILnMISKIN ++++++++= 543210 _)( βββββµαβ
itititititittiit uKPDDLnGiniLnRLSPPEMLnINVLnTANILnMISKIN ++++++++= 543210 _)( βββββµαβ
itititititittiit uKPDDLnGiniLnRLSLPEMLnINVLnTANILnMISKIN ++++++++= 543210 _)( βββββµαβ

4. Result and4. Result and
1. The Dynamics of Economic Growth, Income
Distribution and Poverty
- Mean of economic growth at province level year 2005-
2009 tends to decrease with increasing standard deviation.
Grafik Growth.ppt
- Mean of income inequality at province level year 2005-
2009 tends to increase with decreasing standard deviation.
Grafik Gini.ppt
- Both mean and standard deviation of poor people and
poverty rate at province level tend to decrease. Tabel Miskin.pptx
- High economic growth accompanied by equal distribution
recovery are able to reduce poverty to below mean in
Jambi, Bangka Belitung and Kalimantan Selatan. Bagi
provinsi.ppt

2. Poverty Decomposition and PEGR
Picture 2. PEGR Graph Picture 3. Shapley Decomposition of Poverty Graph
Anti
PPG
Not
PPG PPG
PPG

Table 1. Poverty Decomposition at Province Level
Shapley
Decomposition of
Poverty
2005-2006 2006-2007 2007-2008 2008-2009
Negative growth and
1 province (Kepri) 5 provinces (Kepri,
Sulut, Sulteng,
Gorontalo, Maluku)
9 provinces (Sumbar,
Riau, Sumsel, Jateng,
Banten, NTT, Sulsel,
Gorontalo, Malut)
17 other provinces
Negative growth
effects, positive
3 provinces (Kaltim,
Maluku, Malut)
19 provinces (15
provinces have
negative net effect)
15 provinces (all have
3 provinces (Sulut,
Sultra, Pabar have
Positive growth
effects, negative
11 provinces
(Sumbar, Jambi,
Bengkulu, Lampung,
Banten, Kalbar,
Kalteng, Kalsel,
Sulut, Sultra, Papua)
5 provinces (Jambi,
DIY, NTB, Kaltim,
Malut)
9 provinces (Lampung,
Kepri, Bali, Kalsel,
Sulut, Sultra, Maluku,
Pabar, Papua)
13 provinces (all
have negative net
effect including
Kepri and
Gorontalo)
Positive growth and
15 other provinces - -

Table 2. PEGR at Province Level
Pro Poor Growth
Classification
2005-2006 2006-2007 2007-2008 2008-2009
Pro Poor Growth
(PEGR>Growth)
2 provinces (Kepri,
Kaltim)
5 provinces (Kepri,
NTB, Sulut, Sulteng,
Maluku)
15 provinces 30 other provinces
Not Pro Poor
Growth
(0<PEGR<Growth)
- 15 other provinces 16 provinces 3 provinces (Sulut,
Sultra, Pabar)
Anti Pro Poor
Growth (PEGR<0)
28 Provinces (all
provinces except for
Kepri and Kaltim)
10 Provinces
(Sumbar, Riau,
Jambi, Jabar,
Jateng, DIY, Kalbar,
Kaltim, Malut,
Papua)
2 provinces (Kepri,
Pabar)
-

Factors that influence pro poor growth (poverty reduction) Tabel
Persentase Rumah Tangga Miskin.pptx
Table 3. Factors that Influence Pro Poor Growth by Data Panel Regression Analysis
Variables
Equation One (RLS) Equation Two (RLSP)
Equation Three
(RLSL)
Coefficient P-value Coefficient P-value Coefficient
P-
value
C 9,8840 0,000 8,3170 0,000 8,4871 0,000
LnTANI -0,2652 0,000 -0,3096 0,000 -0,2637 0,000
LnINV_PEM -0,0405 0,269 -0,0503 0,205 -0,0509 0,208
LnRLS -2,2716 0,000 - - - -
LnRLSP - - -1,1129 0,020 - -
LnRLSL - - - - -1,5828 0,006
GINI 0,2326 0,224 0,2093 0,444 0,1171 0,592
LnPDDK 0,8786 0,000 0,8828 0,000 0,8991 0,000
F-Test 331,7900 0,000 182,2900 0,000 143,5700 0,000
R-Square 0,9892 0,9881 0,9886
Hausman Test
7,93 0,1600 10,00 0,0753 10,66 0,0586
Breusch and Pagan LM Test
212,52 0,0000 210,48 0,0000 205,78 0,0000

4. Conclusion and4. Conclusion and
RecommendationRecommendation
Conclusion
1. During MTD in 2005-2009, growth tends to decrease,
income inequality has increasing trend, and poverty
decreases, but they are still far from MTDP target and the
millennium goals. Poverty at province level varies and
not all provinces experience poverty reduction.
2. At the beginning period (2005-2006), both growth and
distribution raised poverty, but by the end period of
2008-2009 both reduce poverty. All provinces have net
effect in reducing poverty at the end period.

Conclusion
3. At the end period of MTDP of 2005-2009, growth is of pro
poor growth characteristic compared to the beginning
period of anti pro poor growth characteristic. Almost all
provinces experience the same condition, with the
exception of several provinces experiencing the contrary.
It is assumed that the different initial condition and
characteristics between provinces, for example
archipelago, also influence the variety of development
result at province level.
4. Agriculture sector’s productivity and education level have
an impact in reducing the number of the poor and
therefore affect the pro poor growth. On the contrary,
the number of population has positive influence in
increasing the number of the poor.

Recommendation
1. Government, particularly regional, should not only pursue
high growth but also pay attention to income distribution to
reduce poverty. High growth with income distribution
recovery will reduce poverty in greater amount.
2. The development program to achieve poverty alleviation
should not only integrate between sectors and cross-
ministries/institutions but also observe the characteristics
between provinces that are different from one another; as
stated in the MTDPN of 2010-2014 that begins to insert
archipelago characteristic in development.

Recommendation
3. Government needs to tighten unfoldment requirement,
especially in creating new province, because of the
complexity of poverty issue in development. New provinces
as the result of unfoldment need extra attention in handling
poverty issue.
4. The government program to improve productivity in
agriculture sector needs intensifying; for examples, research
and development in agriculture sector through agriculture
revitalization.

Recommendation
5.Compulsory study program should be enhanced not for
nine years only but up to SLTA level, because empirical
evidence shows the longer average school time (for both
male and female), the less the number of the poor. Besides
that, in the poverty alleviation program for education, the
government should not only increase the APBN (National
Expenditure and Revenue Budget) but also conduct a firm
surveillance in the implementation and clearer procedure.
6. The government program in controlling population
growth rate should be re-enforced, considering its positive
impact to the number of the poor.

Thank You

Slideshare pro poor growth

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