Growth, Growth Accelerations and the Poor: Lessons from Indonesia

SAMBIT BHATTACHARYYAa and BUDY P. RESOSUDARMOb,*

a University of Sussex, Brighton, UK
b The Australian National University, Canberra, Australia

Issue:
An accelerated and sustainable process of economic growth is often touted as one of the
most important policy issue in economics in order to tackle poverty and create a fairer society,
however, in details as not all forms of growth turn out to be beneficial for the poor. In this paper
is talking about the impact of growth and growth accelerations on poverty and inequality in
Indonesia.
Indonesia is developing countries, it has abundantly resource and therefore their growth
performance is susceptible to the fluctuations in international commodity prices. Furthermore,
the resource sector may not have sufficient backward or forward linkages to the rest of the
economy to benefit the poor. Therefore a booming resource sector may not often translate into a
reduction in poverty. In this context it is important to distinguish between growth in the resource
and non-resource sectors of the economy while analyzing pro-poor growth.
Key words growth, growth accelerations, mining, non-mining, poverty, inequality

Methodology:
This paper is used a new panel dataset covering 26 provinces over the period 19772010 to
distinguish between mining and non-mining sectors of the economy.
Findings:
This paper finds that growth in non-mining significantly reduces poverty and inequality.
In contrast, overall growth and growth in mining appears to have no effect on poverty and
inequality and also identify growth acceleration episodes defined by positive growth in GDP per
capita. Growth acceleration in non-mining reduces poverty and inequality whereas growth
acceleration in mining increases poverty.
This result emphasizes the importance from the non-mining sector in delivering pro-poor
growth in Indonesia (It is in line by other studies of pro-poor growth on other developing
countries). Large concentrations of the poor in these countries are in agriculture and urban
services. Therefore policies to support agriculture, urban services, and manufacturing tend to
have the most direct impact on poverty and inequality.
The mining sector in contrast is capital intensive and therefore generates very little
employment. The mining revenues in developing countries also tend to concentrate within a
network of politically connected elites. As a result the poor often do not benefit from a mining
boom.
For the final finding is emphasizing the importance of policies to support sustainable
growth. A growth acceleration episode affects poverty and inequality. Therefore in order to
reduce poverty. It is important for developing countries to grow their economy sustainably and
do highlight a role of non-resource growth to reduce poverty by policies.

Technological Change, Skill Demand and Wage Inequality: Evidence from Indonesia
JONG-WHA LEEa and DAINN WIEb,*
a Korea University, Seoul, Republic of Korea
b National Graduate Institute for Policy Studies, Japan

Issue :
In recent years, there has been a rapid expansion in education and technological progress
in many developing countries. While these economies emphasize the positive role of education
and transfers of foreign technology in their economic growth, some economists contend that
technological progress may exacerbate wage inequality due to its varied impact on workers
based on their level of education. Pointing out that technology may affect relative wages by
shifting labor demand away from the least skilled group. Since most developing economies are
dominated by low-skilled workers, this shift in labor demand could cause a drastic change in
their labor markets. As argued by the skill-biased technological change hypothesis, demand for
educated and skilled workers increases when skill-complementary technologies permeate the
workplace. A large body of literature investigates the impact of technological changes on relative
labor demand and wage inequality in advanced countries. An empirical evidence of the impact
from technological progress has on wage inequality happens in Indonesia. A share of educated
workers and their skill premiums have recently increased. An evidence from firm-level data in
the manufacturing sector indicates that the diffusion of foreign technologies through imports and
foreign direct investment caused demand to shift toward more skilled labor and increased wage
inequality.
Key words wage inequality, technology, globalization, foreign direct investment, Indonesia

Methodology:
Supply Demand Analysis sets by data which is constructed by 20 annual series from the National
Labor Force Survey (19902009) to examine the long-term trends in relative wages and relative
labor supply by regression analysis, to verify the effect of technological change and labor
demand shift in the manufacturing sectors.
Findings:
By examined the source of rising wage inequality in Indonesia. It seems Indonesia
enjoyed rapid development with narrowing inequality until the early 2000s, when the trend in
wage inequality was reversed.
Wage inequality increased both within and across demographic groups, implying that the
rising wage gap could not simply be explained by changes in education or experience. By using a
nationally representative labor force survey, this paper identified, there have been labor demand
shifts favoring skilled workers since the early 2000s. The empirical analysis confirmed that while
demand shifts were mostly driven by between-industry shifts, about 8% resulted from the change
within industries. Further factor drove which investigated within industry demand shifts in
Indonesia. As Indonesia is a developing country with a low level of technological innovation.
This paper is focused on the role of trade and FDI in transferring advanced technology into the
country. It is shown by regression analysis, FDI and foreign technology embedded in imported
materials increased the employment and wage bill shares of nonproduction workers. Skill-biased
technological change played a significant role. The sizable magnitude of these estimated effects

indicated that further imports of foreign technology could accelerate skill-biased technological
change in Indonesia.
The impacts that technological changes (from trade and foreign investment) have on
labor demand shifts and wage inequality should be of interest to policy makers and the
academics. The design and implementation of policies promoting international trade and
investment, combined with appropriate labor and social policies, would greatly improve
inclusive economic growth in Indonesia. In order to reduce wage inequality, policies should
provide better education and training for unskilled workers, rather than build trade barriers to
protect them from being replaced by new technology. Without hampering economic growth, the
government should respond to the challenges with policy measures that enhance social safety
nets and provide greater financial access for those who need to accumulate additional human
capital to identify possibility rising wage inequality through globalization and technological
progress in developing countries especially in Indonesia.