Pierre van der Eng and I have a new paper out, looking at inequality in Indonesia. Entitled-Top Incomes in Indonesia, 1920-2004, it uses a combination of taxation statistics and survey data to estimate how-the share of the very richest has changed over time. Our abstract:

Using taxation and household survey data, this paper estimates top income shares for Indonesia during 1920-2004. Our results suggest that top income shares grew during the 1920s and 1930s, but fell in the post-war era. In more recent decades, we observe a sharp rise in top income shares during the late-1990s, coincident with the economic downturn, and some evidence that top income shares fell in the early-2000s. For pre-war Indonesia, we decompose top income shares by income source, and find that for groups below the top 0.5 percent, a majority of income was derived from wages. Throughout the twentieth century, top income shares in Indonesia have been higher than in India, broadly comparable to Japan, and somewhat lower than levels prevailing in the United States.

Although the paper covers¬[sgl dagger]an 85-year span (with a break in the middle), it may be that development economists will focus mostly on what we find in the last 20 years. Contrary to the prevailing wisdom that Indonesia is a pretty equal country, our results suggest that the top 1 percent in Indonesia¬[sgl dagger]have¬[sgl dagger]almost as large a share of national income as in the US. We also find¬[sgl dagger]that when the 1997-98 crisis hit, the super-rich did better than the rest of the population.

From a personal perspective, this is the first paper I’ve ever written that looks at a developing country. I was drawn to look at Indonesia because I lived there for three years in the late-1970s. While I learned a lot from working with Pierre, I also found it much tougher than my usual projects (we started it 3 years ago). I hadn’t fully recognised¬[sgl dagger]how imprecise the economic data are in a developing country, and how much more difficult this makes it to do good research.

9:24:19 AM