An Optimistic View of the Long-Run Evolution of Poverty in Indonesia
Indonesia has achieved well-documented and drastic improvements in average incomes and in the reduction of poverty. Much research has discussed this progress. This paper adds to the literature with a new perspective. We discuss poverty in Indonesia using the international poverty lines ($1.25, $2 and we add $10 per day). We generate historic estimates of poverty and to make projections based on various growth and inequality trends. We find that Indonesia has the potential to attain high-income country status in a decade or so and at the same time the potential to end $1.25 per day and $2 per day poverty, but this would require favorable changes in distribution. Looking ahead, the end of poverty in Indonesia may be accompanied by a large proportion of the population vulnerable to poverty for some considerable time to come, suggesting public policy priorities may need to balance insurance and risk management mechanisms with more “traditional” poverty policy. We also find, in contrast to national poverty line analysis, that poverty by the various international poverty lines, is considerably more urbanized, with more than half the poor residing in urban areas currently and the urban proportion of total poverty likely to rise further in the years ahead.
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