Beyond the Overall Economic Downturn: Evidence on Sector-Specific Effects of Violent Conflict from Indonesia

This paper analyses the impact of violent conflict on economic growth using micro-level data from Indonesia. We compile a panel dataset at district level for the period 2002-2008, and disentangle the overall negative economic effect of violent conflict into its sectoral components. Our results reveal substantial differences across sectors, with the most detrimental impact evident in manufacturing industries and the service sectors. Further, the short-run impacts on growth appear to be only temporal, and some evidence for the 'phoenix effect' in the early post-conflict period is found. The construction sector, in particular, recovers soon once conflict ends, while manufacturing industries and the finance sector appear especially reliant on a lasting peace. A series of alternative specifications confirm the main findings of the analysis.Violent conflict, economic growth, Indonesia

The Chronic Poor, the Transient Poor, and the Vulnerable in Indonesia Before and After the Crisis

Using cross-section data from household surveys, we estimate several categories of household poverty and vulnerability in Indonesia by combining the available information on current consumption levels, estimates of vulnerability to poverty, and estimates of expected consumption levels. the results indicate that the level of vulnerability to poverty among Indonesian households after the crisis unambiguously increased from pre-crisis levels. furthermore, not only did the poverty rate in Indonesia increase significantly because of the crisis, but also much of this increase was due to an increase in chronic poverty. likewise, the number of households that have high vulnerability to poverty has almost tripled. as a result, the total number of households in the vulnerable category has jumped from 18 percent of the population in 1996 to more than one third of the population in 1999. *we thank shubham chauduri and john maxwell for valuable comments and suggestions and daniel perwira and wenefrida widyanti for excellent research assistance. we are grateful to statistics Indonesia (bps) for providing access to the data

The Measurement and Trends of Unemployment in Indonesia : The Issue of Discouraged Workers

This study provides an overview of the concepts used to measure unemployment in Indonesia and their consequences for the measured unemployment trends. One finding shows that BPSs decision in 2001 to relax the definition of labor force by including discouraged workers has resulted in an artificially high open unemployment rate and disguises the actual decline in traditionally-measured open unemployment rates post-crisis. Another finding indicates that discouraged workers in Indonesia are not confined only to the poor and those who are denied access to the proper job market. We recommend that, if Indonesia still wants to utilize a broader definition of the labor force, the measurement of open unemployment should adhere to the ILOs recommendation of only including those discouraged workers who are still willing to work. The discouraged workers who are unwilling to work should be left in the out of labor force category.discouraged workers, open unemployment, measurement, Indonesia

Beyond the Overall Economic Downturn: Evidence on Sector-specific Effects of Violent Conflict From Indonesia

This paper analyzes the impact of violent conflict on economic activity using micro level data sources from Indonesia. the study compiled a panel dataset at the kabupaten level for the period 2002-2008, and attempted to disentangle the overall negative effect of violent conflict on economic growth into its sectoral components. we find substantial differences across sectors, with the most detrimental impact evident in manufacturing industries and the service sector. furthermore, the short-run impacts on growth appear to be only temporal and some evidence of the "phoenix effect" in the ready post-conflict period is found. the construction sector, in particular, recovers quickly once the conflict ends, while manufacturing industries and the finance sector appear especially reliant on a lasting peace. the results therefore reveal the substantial effects of violent conflict on the structure of the economy and hence its longer-term growth trajectory. a series of alternative specifications confirm the main findings of the analysis. keywords: violent conflict, economic growth, Indonesia jel codes: 011, f5

Safety nets and safety ropes - who benefited from two Indonesian crisis programs - the"poor"or the"shocked"?

Imagine several mountain climbers, scaling a cliff face, who want protection from falling. One way to protect them would be to place a net at the bottom of the cliff to catch any climber just before he hits the ground. Another would be to provide a rope, and a set of movable devices that can be attached to the cliff; as the climbers scale the cliff, they attach the rope at higher levels, so that if a climber falls, he falls only by the length of the rope. In this paper, the :safety net"guarantees against a fall past an absolute level; the"safety rope"guarantees against a fall of more than a given distance. The safety net is concerned with an increase in poverty; the safety rope mitigates risk through social insurance, or social protection. Calculations of the benefit incidence, and targeting effectiveness of safety net programs, typically examine only the relationship between a household's current expenditures, and program participation. But in programs that respond to an economic shock, or intend to mitigate household risk, it is not only the current level of expenditures that matters, but also changes in expenditures. Safety net programs may intend to benefit only the currently poor; programs to mitigate shocks ("safety rope"programs) may intend to provide transfers to those whose incomes have fallen, even if they have not fallen below an absolute poverty threshold. The authors examine the targeting performance of tow programs, created to respond to the social impacts of Indonesia's crisis. They find strong evidence that one program, subsidized sales of rice targeted to the permanently poor, was only weakly related to the shock in consumption spending. A job creation program was much more responsive to changes in spending. A Household that started in the third quintile in expenditures in 1997, and fell to the lowest quintile between 1997, and 1998, was four times as likely to have participated in the job creation program as a household starting in the third quintile in 1997, but experiencing a positive shock. But the household experiencing a negative shock, was only fifty percent more likely to have received subsidized rice, than a household experiencing a positive shock.Poverty Monitoring&Analysis,Health Economics&Finance,Decentralization,ICT Policy and Strategies,Environmental Economics&Policies,Poverty Monitoring&Analysis,Health Economics&Finance,ICT Policy and Strategies,Environmental Economics&Policies,Housing&Human Habitats

What Happened to Child Labor in Indonesia during the Economic Crisis : The Trade-off between School and Work

Although in general less prevalent than other developing countries at similar stage of development, the problem of child labor in Indonesia is significant. Like in other countries, this study finds that there is a strong link between the child labor phenomenon and poverty. The profile of child labor largely mirrors the profile of poverty. Furthermore, poverty is found as an important determinant of working for children. However, working does not always completely eliminate a childs opportunity to obtain formal education. In fact, children from poor households can still go to school by undertaking part-time work to pay for their education, implying that banning working for these children may force them to drop out of schools instead. Since the phenomenon of child labor is strongly associated with and determined by poverty, the most effective policy for eliminating child labor is through poverty alleviation. Other policies that can foster the rate of reduction in child labor are to make it easier for children from poor families to access education and to increase the opportunity cost of working by improving the quality of education to increase the rate of return to education.child, labour

Quantifying vulnerability to poverty - a proposed measure, applied to Indonesia

Vulnerability is an important aspect of households'experience of poverty. Many households, while not currently in poverty, recognize that they are vulnerable to events - a bad harvest, a lost job, an illness, and unexpected expense, an economic downturn - that could easily push them into poverty. Most operational measures define poverty as some function of the shortfall of current income, or consumption expenditures from a poverty line, and hence measure poverty only at a single point in time. The authors propose a simple expansion of those measures to quantify vulnerability to poverty. They define vulnerability as a probability, the risk that a household will experience at least one episode of poverty in the near future. A household is defined as vulnerable if it has 50-50 odds, or worse of falling into poverty. Using those definitions, they calculate the"vulnerability of poverty line"(VPL) as the level of expenditures below which a household is vulnerable to poverty. The VPL allows the calculation of a"headcount vulnerability rate"(the proportion of households vulnerable to poverty), a direct analogue of the"headcount poverty rate". The authors implement this approach using two sets of panel data from Indonesia. First they show that if the poverty line is set so that the headcount poverty rate is twenty percent, the proportion of households vulnerable to poverty is roughly 30-50 percent. In addition to the twenty percent currently poor, an additional 10-30 percent of the population is at substantial risk of poverty. They illustrate the usefulness of this approach for targeting, by examining differences in vulnerability between households by gender, level of education, urban-rural residence, land-holding status, and sector of occupation of the head of household.Health Economics&Finance,Environmental Economics&Policies,Health Systems Development&Reform,Services&Transfers to Poor,Poverty Reduction Strategies,Services&Transfers to Poor,Environmental Economics&Policies,Health Economics&Finance,Poverty Assessment,Achieving Shared Growth

Measurements of poverty in Indonesia - 1996, 1999, and beyond

Indonesia's economic crisis has caused a consumption expenditures deterioration in the welfare of Indonesians. Focusing on only one dimension of individual, and family welfare - consumption expenditures - the authors analyze two issues associated with the measurement of poverty. The first issue is how to produce regionally consistent poverty lines - that is, how to define a level of spending for each region that produces the same material standard of living. Without comparable data on prices, there is a problem of circularity. Choosing the reference population is important for defining the price level by which to deflate money expenditures to reach the same welfare level, but one needs to know the price level to define the reference population as a group with the same real expenditures. To address the problem of circularity, the authors use an iterative approach to defining poverty, one that produces consistent results across regions. They then use those poverty lines to examine the common"poverty profiles"(by location, sector, and so on). The second issueis more conceptual: how to expand the narrow measure of poverty, based on spending for consumption, with extensions that expand how welfare is measured, and allow more consistent comparisons of different individuals'welfare levels.Environmental Economics&Policies,Health Systems Development&Reform,Poverty Reduction Strategies,Health Economics&Finance,Public Health Promotion,Poverty Reduction Strategies,Poverty Lines,Poverty Assessment,Environmental Economics&Policies,Achieving Shared Growth