Chapter

Household Responses to the Financial Crisis in Indonesia: Longitudinal Evidence on Poverty, Resources, and Well-Being

Duncan Thomas and Elizabeth Frankenberg

in Globalization and Poverty

Published by University of Chicago Press

Published in print April 2007 | ISBN: 9780226317946
Published online February 2013 | e-ISBN: 9780226318004 | DOI: http://dx.doi.org/10.7208/chicago/9780226318004.003.0013
Household Responses to the Financial Crisis in Indonesia: Longitudinal Evidence on Poverty, Resources, and Well-Being

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This chapter explores the impact of financial crisis on the poor in Indonesia. It demonstrates that in the first year of the crisis, poverty rose by between 50 and 100 percent, real wages declined by around 40 percent, and household per capita consumption fell by around 15 percent. The crisis affected the poorest, the middle-income households, and households in the upper part of the income distribution in Indonesia. The financial crisis was accompanied by large changes both in the absolute price level and in relative prices. The evidence on human capital investments indicates that as the crisis unfolded, several dimensions of education and health were deleteriously affected, with the poorest and most vulnerable paying the biggest price in several important dimensions of human capital. The empirical evidence in the Indonesia Family Life Survey (IFLS) indicates that the crisis led in a dramatic decline in the standard of living.

Keywords: financial crisis; poor; Indonesia; poverty; wages; household; income distribution; human capital; Indonesia Family Life Survey

Chapter.  17826 words.  Illustrated.

Subjects: Economic Development and Growth

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