Simulation Impact of Land Redistribution on the Indonesian Economy

Abstract

This study aims to simulate the impact of the land redistribution policy to the Indonesian economy. A Computable General Equilibrium (CGE) and Microsimulation Model is developed and exersiced to analysis the impacts of land redistribution to income distribution, productions and poverty. Based on 2008 Indonesian Social Accounting Matrix (SAM) and National Socio-Economic Household Survey (SUSENAS) 2008 data set; the land redistribution simulation show that land redistribution have the potential of generating economic growth, poverty and income inequality reduction. Land redistribution expected to affect household income structur and subject to household consumption composition changes. This changes implicitly shows that there are some changes in demand of consumption goods which will be responded by firms by changing the composition of their output. The results suggest that land redistribution will raise Indonesian GDP growth. Furthermore, the changes in income structure of each household particularly improved the condition of poverty level and income distribution in Indonesia. It is shown by the decrease in three poverty indicators (i.e. headcount index, poverty gap ratio and severity index) and income distribution indicator which is in line with land redistribution policy.