5
III. POVERTY AND INCOME DISTRIBUTION IN INDONESIA
In this chapter we captured a short illustration of poverty and income distribution in Indonesia during 1996-2002 in terms of total poor household, gini coefficient and
distribution of expenditure both in rural and urban areas. Gini coefficient is an indicator that could explain the condition of income distribution.
Table 1 Number and Percentage of Poor People in Indonesia, 1996-2005
Number of Poor People Million Percentage of Poor People
Year Urban Rural Total Urban Rural Total
1996 9.42 24.59
34.01 13.39
19.78 17.47
1998 17.60 31.90
49.50 21.92
25.72 24.23
1999 15.64 32.33
47.97 19.41
26.03 23.43
2000 12.30 26.40
38.70 14.60
22.38 19.14
2001 8.60 29.30
37.90 9.76
24.84 18.41
2002 13.30 25.10
38.40 14.46
21.10 18.20
2003 12.20 25.10
37.30 13.57
20.23 17.42
2004 11.40 24.80
36.10 12.13
20.11 16.66
2005 12.40 22.70
35.10 11.37
19.51 15.97
Source: Statistics Indonesia, 2005. Table 1 shows the total number and percentage of poor people in Indonesia both in rural
and urban areas. During the crisis, the percentage of poor people in Indonesia increase moderately from 17.47 in 1996 to 24.23 in 1998. However, the total percentages of
poor people continuously decrease to 15.97 in 2005. This condition implies that the macroeconomic condition in Indonesia was improved moderately. In the context of areas,
the total number of poor people in rural areas was higher relative to urban areas. The average percentage of poor people in rural areas during the period 1996-2005 was 68.4
relative to total poor people in nation and the highest percentage occurred in 2001 as much as 77.3.
6
Table 2 Income Distribution in Indonesia 1996-2005: Gini Coefficient
Gini Coefficient Year
Urban Rural
U R 1996 0.362 0.274 0.356
1999 0.326 0.244 0.311 2002 0.317 0.247 0.288
2005 0.338 0.264 0.343 Source: Statistics Indonesia, 2005.
Next, Table 2 shows that the gini coefficient for urban area decreases from 0.362 in 1996 to 0.317 in 2002 and increases to 0.338 in 2005. This implies that income
distribution in urban areas was better in 2002 relative to 1996 and worse in 2005. Meanwhile, income distribution in rural areas was better in 1999 and worse in the next
two periods. Overall, income distribution in Indonesia has the same trend with income distribution in urban areas.
Table 3 Distribution of Expenditure in Urban and Rural Areas 1996-2005
Area Group 1996
1999 2002
2005 Urban
- Bottom 40 - Mid 40
- Top 20 19.03
36.93 44.04
20.52 37.74
41.74 21.34
37.43 41.23
20.38 36.86
42.75 Rural
- Bottom 40 - Mid 40
- Top 20 23.18
38.99 37.83
24.59 39.53
35.88 24.97
39.27 35.75
24.19 39.13
36.68 Urban Rural
- Bottom 40 - Mid 40
- Top 20 20.25
35.05 44.70
21.50 37.35
41.15 22.83
38.19 38.98
21.84 37.73
40.43 Source: Statistics Indonesia, 2005.
7 Expenditure distribution in terms of region and group can be shown in Table 3. In
generally, most expenditure distribution was spent by 20 percent people who are categorized as a top group. In more specific framework, most expenditure distribution in
rural areas was spent by 40 percent people who are categorized as a mid group. Whereas, in urban areas the most expenditure distribution was spent by 20 percent people who are
categorized as a top group.
IV. THE MODEL SPESIFICATION
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