The effect of infrastructure access and quality on non-farm enterprises in rural Indonesia

There is growing interest in the rural non-farm sector in developing countries as a contributor to economic growth, employment generation, livelihood diversification and poverty reduction. Access to infrastructure is identified in some studies as a factor that affects nonfarm rural employment and income but less attention has been paid to the constraints imposed by poor quality infrastructure. In this paper we use data from 4000 households in rural Indonesia to show that the quality of two key types of infrastructure – roads and electricity – affects both employment in and income from non-farm enterprises. It appears that there would be gains from development strategies that improve both the access to and the quality of rural infrastructure

Household energy demand and the equity and efficiency aspects of subsidy reform in Indonesia

The proper design of price interventions in energy markets requires consideration of equity and efficiency effects. In this paper, budget survey data from 29,000 Indonesian households are used to estimate a demand system for five energy sources, which is identified by the spatial variation in unit values(expenditures divided by quantities). We correct for the various quality and measurement error biases that result when unit values are used as proxies for market prices. The price elasticities are combined with tax and subsidy rates to calculate the marginal social cost of price changes for each item. The results suggest than even with high levels of inequality aversion there is a case for reducing the large subsides on kerosene in Indonesia, supporting the reforms that have been announced recently

An illustration of the average exit time measure of poverty

The goal of the World Bank is 'a world free of poverty' but the most widely used poverty measures do not show when poverty might be eliminated. The 'head-count index' simply counts the poor, while the 'poverty gap index' shows their average shortfall from the poverty line. Neither measure reflects changes in the distribution of incomes amongst the poor, but squaring the poverty gap brings sensitivity to inequality, albeit at the cost of intuitive interpretation. This paper illustrates a new measure of poverty [Morduch, J., 1998, Poverty, Economic Growth and Average Exit Time, Economics Letters, 59: 385-390]. This new poverty measure is distributionally-sensitive and has a ready interpretation as the average time taken to exit poverty with a constant and uniform growth rate. The illustration uses data from Papua New Guinea, which is the country with the highest degree of inequality in the Asia-Pacific region

Household energy demand and the equity and efficiency aspects of subsidy reform in Indonesia

The proper design of price interventions in energy markets requires consideration of equity and efficiency effects. In this paper, budget survey data from 29,000 Indonesian households are used to estimate a demand system for five energy sources, which is identified by the spatial variation in unit values(expenditures divided by quantities). We correct for the various quality and measurement error biases that result when unit values are used as proxies for market prices. The price elasticities are combined with tax and subsidy rates to calculate the marginal social cost of price changes for each item. The results suggest than even with high levels of inequality aversion there is a case for reducing the large subsides on kerosene in Indonesia, supporting the reforms that have been announced recently

Household energy demand and the equity and efficiency aspects of subsidy reform in Indonesia

The proper design of price interventions in energy markets requires consideration of equity and efficiency effects. In this paper, budget survey data from 29,000 Indonesian households are used to estimate a demand system for five energy sources, which is identified by the spatial variation in unit values (expenditures divided by quantities). We correct for the various quality and measurement error biases that result when unit values are used as proxies for market prices. The price elasticities are combined with tax and subsidy rates to calculate the marginal social cost of price changes for each item. The results suggest that even with high levels of inequality aversion there is a case for reducing the large subsidies on kerosene in Indonesia, supporting the reforms that have been announced recently

Using Engel curves to measure CPI bias for Indonesia

To measure real income growth over time a price index is needed to adjust for changes in the cost of living. The Consumer Price Index (CPI) is often used for this task but studies from several countries show the CPI is a biased measure of changes in the cost of living, leading to potentially wrong estimates of the rate of growth of real income. In this paper CPI bias for Indonesia is calculated by estimating food Engel curves for households with the same level of CPI-deflated incomes at four different points in time between 1993 and 2008. The results suggest CPI bias was initially negative during the Asian Crisis but has been positive since 2000. Over the entire period, CPI bias has averaged four percent annually, equivalent to almost one-third of the measured inflation rate

Spatial autocorrelation and non-farm rural enterprises in Indonesia

Non-farm rural enterprises (NFRE) are increasingly studied because of their role in poverty reduction. However, existing studies of the effects of infrastructure on NFRE may give incorrect inferences because they typically fail to account for spatial effects. Such effects could reflect either spatial errors due to excluded local effects or spatial lags due to excluded interactions, such as between households switching out of farm work. We use rural investment climate survey data from Indonesia that allow distances between each household to be measured so that spatial effects can be modeled to assess the bias from ignoring such effects.Infrastructure, Non-farm enterprises, Spatial statistics, Indonesia, Community/Rural/Urban Development,

Household Energy Demand and the Equity and Efficiency Aspects of Subsidy Reform in Indonesia

The proper design of price interventions requires consideration of equity and efficiency effects. In this paper, budget survey data from 29,000 Indonesian households are used to estimate a demand system for five energy sources, which is identified by the spatial variation in unit values (expenditures divided by quantities). We correct for the various quality and measurement error biases that result when unit values are used as proxies for market prices. The price elasticities are combined with tax and subsidy rates to calculate the marginal social cost of price changes for each item. The results suggest that even at high levels of inequality aversion there is a strong case for reducing the large subsidies on gasoline and kerosene, supporting the reforms that have been carried out recently.Demand elasticities, Energy, Fuels, Subsidies, Unit Values, Resource /Energy Economics and Policy, D12, Q31,

How widespread are non-linear crowding out effects? The response of private transfers to income in four developing countries

This paper investigates whether there is a non-linear relationship between income and the private transfers received by households in developing countries. If private transfers are unresponsive to household income, expansion of public social security and other transfer programs is unlikely to crowd out private transfers, contrary to concerns first raised by Barro and Becker. There is little existing evidence for crowding out effects in the literature, but this may be because they have been obscured by methods that ignore non-linearities. If donors switch from altruistic motivations to exchange motivations as recipient income increases, a sharp non-linear relationship between private transfers and income may result. In fact, threshold regression techniques find such non-linearity in the Philippines and after accounting for these there is evidence of serious crowding out, with 30 to 80 percent of private transfers potentially displaced for low-income households [Cox, Hansen and Jimenez 2004, 'How Responsiveare Private Transfers to Income?' Journal of Public Economics]. To see if these non-linear effects occur more widely, semiparametric and threshold regression methods are used to model private transfers in four developing countries - China, Indonesia, Papua New Guinea and Vietnam. The results of our paper suggest that non-linear crowding-out effects are not important features of transfer behaviour in these countries. The transfer derivatives under a variety of assumptions only range between 0 and -0.08. If our results are valid, expansions of public social security to cover the poorest households need not be stymied by offsetting private responses

Impact Evaluation of a Large-Scale Rural Sanitation Project in Indonesia

Total Sanitation and Sanitation Marketing (TSSM) is the Indonesian component of World Bank Water and Sanitation Program's Scaling Up Rural Sanitation initiative. The approach consists of raising awareness of the problems of open defecation; marketing sanitation products; and supporting policies, financing, training, and regulations that are conducive to these efforts. Therefore, desired outcomes of the program include changes in perception of the consequences of poor sanitation, toilet construction and access to improved sanitation, reduction in open defecation, and child health outcomes. This impact evaluation assesses these results using a randomized controlled trial (RCT), and unlike many RCTs that are carried out on pilot programs, it looks at an intervention that has been implemented at scale and led by the government under real-world conditions, providing more reliable estimates. TSSM is associated with sanitation improvements overall, particularly among wealthier households that had no sanitation prior to the intervention