Abstract
This study evaluates consistency of the trickle down hypothesis, that shows parabolic relationship between poverty incidence and per capita aggregate gross domestic product (GDP), with Indonesia data. In addition to aggregate GDP, the hypothesis was also tested by using GDP disaggregated by sector and adding some alternative price variables. The study shows that per capita aggregate GDP is not significantly related with poverty incidence. Impact of disaggregated GDP varies by sector and by region. Agriculture GDP has the greatest impact on poverty incidence in rural area, whereas industrial GDP determines poverty incidence in urban area. Poverty incidence is also determined by rice price. These findings indicate that promoting agricultural development, food crop subsector in particular, is an appropriate strategy for poverty alleviation.
