The Effects of Location and Sectoral Components of Economic Growth on Poverty: Evidence from Indonesia

Poverty and Inequality Analysis

In this paper, we investigate the relationship between economic growth and poverty reduction by differentiating growth and poverty into their sectoral composition and urban–rural location using data from Indonesia. We find that rural services growth reduces poverty in all sectors and locations. However, urban services growth has the largest effect on poverty in most sectors. Finally, we also find that rural agriculture growth strongly reduces poverty in rural areas, the largest contributor to poverty in Indonesia. This implies that while agriculture growth in rural areas still plays a major role in reducing poverty, policies that enable strong growth in the services sector in both urban and rural areas would expedite poverty reduction.

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Author 
Asep Suryahadi
Daniel Suryadarma
Sudarno Sumarto
Author(s)
Daniel Suryadarma
Research Area 
National
Keywords 
economic growth
poverty
urban
rural
Indonesia
Publication Type 
Journal Article