A Decade Study of Agriculture Households in Indonesia: The Role of Land and Labor Mobility on Poverty and Welfare Dynamics

Abstraksi

The economic conventional wisdom stated by Arthur Lewis in his dual sector theorem says that people that work in the agriculture (traditional) sector that move out to non-agriculture (modern) sector will be better off due to the modern sector having higher productivity. This also applies to farmland as farmland should be reinvested into capital that gives higher returns. In Indonesia, the number of agriculture workers have continually decreased in the last decade. This process is accompanied by the decrease of farmland ownership of households. These two phenomena show that farmers are completely leaving agriculture sector and in hand with Lewis’s theorem. However, can we guarantee they are better off? Observing the last three waves of IFLS (Indonesia Family Life Survey) the writer investigates the factors that influence poverty and welfare dynamics of agriculture households. The writer’s econometric evidence confirm that the movement of agriculture has decreased the probability of poverty and positive effects on welfare only in the early decade (2000-2007). From 2007-2014 and in the long-run, the effects of the movement aren’t significant. On the other hand, farmland ownership continues to have an important role for agriculture households as their main livelihood. Higher Education and agriculture assets show a decrease of probability of being poor and increase in welfare respectively. These findings suggest that moving out of agriculture is not the solution to improve farmers well-being in the current situation. Keeping farmland ownership, investment in human capital, and modernization of agriculture should be the main focus in agriculture development.