Growth, Growth Accelerations and the Poor: Lessons from IndonesiaSAMBIT BHATTACHARYYAa and BUDY P. RESOSUDARMOb,*

a University of Sussex, Brighton, UKb 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 1977–2010 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 IndonesiaJONG-WHA LEEa and DAINN WIEb,*

a Korea University, Seoul, Republic of Koreab 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 (1990–2009) 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.