A MULTIPLIER DECOMPOSITION METHOD TO ANALYZE POVERTY ALLEVIATION

The objective of this paper is to present a multiplier decomposition m ethod focusing on poverty alleviation. The decomposition captures the various mechanisms and linkages through which a production sector's ou tput contributes to poverty alleviation within a socioeconomic system represented by a Social Accounting Matrix (SAM). It is shown that a mu ltiplier can be broken down into two multiplicative effects, the distr ibutional and interdependency effects. The decomposition method is app lied to the case of Indonesia. A key policy implication is that the hu man capital of the poor needs to be enhanced if they are not to be sea led off from the industrialization process.