Transforming Indonesia: Structural change in a regional perspective 1968-2010

Since 1968, Indonesia has been among the few developing countries able to sustain per capita income growth over 5%. However, poverty and surplus labor are still main features of the economy. We ask to what extent the dual nature of growth has stimulated structural change, or just rewarded a particular sector or region. We find that the emblematic State support to agriculture has not untapped the potential growth in labour reallocation. Despite the income diversification within and outside agriculture, the linkages between sectors and regions remain weak. For catching up, the integration of the outer regions into the economy must still go through agriculture, investment in human capital, infrastructure, social policies and local capabilities.