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Poverty, Labour Markets and Trade Liberalization in Indonesia

Author

Listed:
  • Kis-Katos, Krisztina

    (University of Goettingen)

  • Sparrow, Robert

    (Wageningen University)

Abstract
We measure the effects of trade liberalization over the period of 1993-2002 on regional poverty levels in 259 Indonesian regions, and investigate the labour market mechanisms behind these effects. The identification strategy relies on combining information on initial regional labour and product market structure with the exogenous tariff reduction schedule over four three-year periods. We find that poverty reduced more in regions that were more strongly exposed to import tariff liberalization. Among the potential channels behind this effect, we highlight the formalization of the unskilled labour force and structural reallocation of labour. We also show that job formation and increases in unskilled wages were related to reductions in import tariffs on intermediate goods and not to reductions in import tariffs on final outputs. These results point towards increasing firm competitiveness as a driving factor behind the beneficial poverty effects.

Suggested Citation

  • Kis-Katos, Krisztina & Sparrow, Robert, 2013. "Poverty, Labour Markets and Trade Liberalization in Indonesia," IZA Discussion Papers 7645, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7645
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    References listed on IDEAS

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    More about this item

    Keywords

    trade liberalization; labour markets; poverty; Indonesia;
    All these keywords.

    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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