Policy Research
Expenditure changes and poverty impact. This paper looks first at new data sources on changes over the last year in expenditures and asset ownership and asset sales as proxies for income changes due to the crisis. These data dispel the notion that half of Indonesia’s population will slip below the poverty line (predictions which were analytically unsound in any case).
Calculations of the benefit incidence and targeting effectiveness of "safety net" programs have typically examined only the relationship between a household's current expenditures and program participation. However, in programs that respond to an economic shock or intend to mitigate household risk, it is not just the current level of expenditures that matters, but also changes in expenditures.
Designing and implementing social safety net programs in 1998 was a new experience for Indonesia. The severe social impacts of the crisis, which began in mid 1997, forced the government to act rapidly to safeguard real incomes and access to social services for the poor by instituting new and expanded programs.
The potential benefits of accurate targeting are substantial because public expenditures can be concentrated to the needy, thereby saving money and improving program efficiency. However, targeting also entails administrative costs associated with identifying, reaching, and monitoring potential beneficiaries.
After over 30 years under a highly centralized national government, Indonesia decided to implement a policy of decentralization that became effective on January 1st, 2001. This paper examines the preparations that have been undertaken within the regions, some of the initial implementation measures, and some of the key problems that emerged during the process of decentralization as managed by regional governments.
