Rural income dynamics in post-crisis Indonesia: evidence from Central Sulawesi

Indonesia is an emerging economy characterized by increasing rural–urban income disparities and high poverty rates, particularly in rural areas. Despite a large part of the Indonesian population residing in rural areas, no studies currently exist that thoroughly analyze the factors determining rural income dynamics for the years after the Asian Financial Crisis of 1997/98. Utilizing a new panel data set collected in Central Sulawesi, this study aims to shed more light on rural livelihoods and therefore investigates the socio–economic factors driving the income process of Indonesian farmers at rainforest margins. Our results indicate that a sharp increase in rural incomes took place in the post–crisis period. While traditional agriculture still constitutes the backbone of household incomes, the ability to alleviate poverty and to enjoy income growth has been strongly associated with a household’s ability to diversify into the non–agricultural sector of the economy, to focus on higher valueadded agricultural activities and its capability to invest into new production techniques. Comparing our results to the national SUSENAS household data for Central Sulawesi we find that our findings enhance the understanding of rural income generation processes in Indonesia.