In the concept of pro-poor growth, economic growth accompanied by fair income distribution will accelerate the rate of poverty reduction. Employing extensive data of household expenditures and some economic indicators, this study will examine the performance of economic growth in Indonesia whether it has been pro-poor over the period 2005-2013. We employ two methods in this article, Growth Incidence Curve (GIC) method, and Pro-Poor Growth Index (PPGI) method. By applying the GIC method, our empirical results indicate that economic growth in Indonesia has not been pro-poor during the observation period. The curve shows that the highest income distribution enjoys increased consumption more than the lower percentile. Furthermore, PPGI method has revealed that economic growth, inequality, and an interaction term between economic growth and inequality have been significant to influence poverty incidence in Indonesia. Our empirical result also reveals that among three sectors, it was manufacturing industry that significantly reduced the poverty incidence, while the agriculture unexpectedly had a devastating impact on poverty alleviation efforts. The services sector, meanwhile, has not contributed to poverty alleviation in Indonesia. Furthermore, none of the government spending in education and health that significantly contributes to poverty alleviation.

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Papyrakis, Elissaios
hdl.handle.net/2105/41658
Economics of Development (ECD)
International Institute of Social Studies

Permadi, Yudistira Andi. (2017, December 15). Growth, Inequality, and Poverty: An Analysis of Pro-Poor Growth in Indonesia. Economics of Development (ECD). Retrieved from http://hdl.handle.net/2105/41658