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Assessing the Poverty Impact of Economic Growth: The Case of Indonesia

Sponsor: Thematic Group on Poverty Impact Analysis, Monitoring and Evaluation
Presenter: B. Essama-Nssah 

Description: Poverty reduction has become a fundamental objective of development, and therefore a metric for assessing the effectiveness of various interventions.  Given that economic growth can be a powerful instrument of income poverty reduction, there is a need for meaningful ways of assessing the poverty impact of growth.  The purpose of this seminar is to propose a new measure of pro-poorness and discuss its application to the case of Indonesia in the 1990s.  The underlying approach embeds the concept of elasticity within the logic of social impact evaluation to assess variations in individual and social welfare attributable to the process of economic growth.  Its application to Indonesia reveals that the amount of poverty reduction achieved over the 1993-2002 period remains far below what would have achieved under distributional neutrality. This conclusion is robust to the choice of a poverty measure among members of the additively separable class.  Focusing on the 1999-2002 period, we also find that some poor people gained from the economic growth that occurred over that period, but these gains do not measure up to the losses suffered by the rest of the poor. Finally, the behavior of expenditures components over the same period reveals that this weak performance is due mainly to changes in food expenditure.


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