NTA2020 Maliki

Global Meeting on Population and the Generational Economy, August 2020

Presentation: Maliki, Dinar Kharisma, Fisca Aulia, The role of social protection transfers to reduce poverty and inequality: an NTA approach

Abstract

Over the last ten years, Indonesia has experienced a rapid decrease in its poverty rates. It has reached a single digit by the end of 2018 of 9.8%. The Gini Ratio has also consistently declined to 0.38 from its peak of 0.42 in 2014. One of the keys to this success is the government’s initiative to establish more systematic social protection programs. For more than a decade, the Program Keluarga Harapan (PKH) conditional cash transfers program has been a strong pillar of cash assistance and human capital development for the poorest. PKH has now reached 10 million households, a significant expansion since its launch in 2007. The government also established a more robust Sembako food assistance program covering the poorest 15.2 million households. Initial assessment suggests that the programs help maintain the poor’s consumption above the poverty line, contributing to the lower Gini Ratio. This paper attempts to empirically explain how the programs significantly contribute to the poor’s consumption and reduce inequality. Using the National Transfers Account Methodology, we estimate the financing sources of individual consumption. We assume the social protection programs coverage as government transfers to the designated primary household members, and evaluate how the transfers vary across age, poverty status, and residential locations. From the 2019 National Socioeconomic Survey (Susenas) data, we observe that the programs’ targeting accuracy was only 40-45%. Only around 42% of the poor received PKH, and about 44% accepted the Sembako program. The proportion of the poor who received both programs is even lower. In this study, we also simulate an improvement of the programs’ targeting to 60% accuracy or higher. This simulation provides insights into the programs’ effectiveness if the targeting is better. Primarily, the simulation informs how under the more accurate targeting system, the transfers contribute to the individual consumption, especially children and the elderly, elevate the most impoverished households’ consumption above the poverty line, and increase the likelihood of poor children and elderly to escape poverty.

File: NTA2020 Maliki

Paper: NTA2020 paper Maliki

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