Does economic crisis have different impact on husbands and wives? Evidence from the Asian Financial Crisis in Indonesia

• Published date: 01 November 2018
• Author: Sarah Xue Dong
• Date: 01 November 2018
• DOI: http://doi.org/10.1111/rode.12521

SPECIAL ISSUE ARTICLE

Does economic crisis have different impact on

husbands and wives? Evidence from the Asian

Financial Crisis in Indonesia

Sarah Xue Dong

Crawford School of Public Policy,

Australian National University

Correspondence

Sarah Xue Dong

Ardnt-Corden Department of Economics,

Coombs Building, Australian National

University, Acton, ACT 2601, Australia

Email: sarah.dong@anu.edu.au

Funding information

This project was funded by UNU-WIDER.

Abstract

This paper analyzes the intra-household allocation of risk-

coping mechanisms by testing whether the Asian financial

crisis affected married men and women differently in

Indonesia. It estimates the effect of the district consump-

tion shock during the crisis on the change in married

men’s and women’s working status and assets. It finds

that the regional shock is associated with a large increase

in wives’employment and a large decrease in wives’

business assets in urban areas, and not associated with

change in husbands’working status or asset holdings in

urban areas. In rural areas the regional shock is associated

with a drop in women’s business assets and not related to

other outcomes of husbands or wives. Receiving govern-

ment social safety net program aid during the crisis seems

to substitute for the decrease in business assets of women

as a coping strategy in both urban and rural areas.

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INTRODUCTION

Households in developing countries face high risks of economic shocks.

1

Due to the lack of ade-

quate formal insurance coverage in developing countries, households usually have to rely on infor-

mal coping mechanisms such as decreasing consumption, borrowing from friends and family,

selling assets, and increasing working hours (for surveys on coping strategies, see Heltberg et al.,

2014; Dercon, 2002; Morduch, 1995). These coping mechanisms are often costly. Less

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©2018 UNU-WIDER. Review of Development Economics published by John Wiley & Sons Ltd

DOI: 10.1111/rode.12521

Rev Dev Econ. 2018;22:1489–1512. wileyonlinelibrary.com/journal/rode

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consumption can result in less food and nutrition intake that can impact long-term health. Long

working hours not only affect leisure currently, but can also lead to fewer hours invested in chil-

dren, or have long-term health effects. Selling assets, especially productive assets, can impact

long-term income generation and consumption paths.

Because of the cost associated with these coping strategies, it is interesting to ask who in a

household bears more of the cost when a shock happens and whether gender matters in this pro-

cess. From a policy point of view, knowing the intra-household allocation of risk-coping is

important because better-targeted social safety net policies can be designed based on the find-

ings. Also, studies from developing countries have already found some evidence of gender dif-

ference in response to shocks, usually resulting in women or girls bearing more of the cost of a

shock.

2

This study analyzes the impact of an aggregate economic shock in Indonesia, the Asian Finan-

cial Crisis (AFC), on married men and women in terms of their working status and asset holdings.

3

The AFC is the largest aggregate economic shock experienced by Indonesia in the last 50 years.

Gross domestic product per capita dropped by 20 percent from 1997 to 1998, and did not recover

to the pre-crisis level until ten years later. Many studies have looked at the impact of the AFC on

various outcomes in Indonesia(see Frankenberg et al., 1999, 2003; Hartono and Ehrmann, 2001;

Manning, 2000; Poppele et al., 2000; Smith et al., 2002; Soesastro, 1998; Strauss et al., 2004;

Wetterberg et al., 1999). At the household level, it is found that households decreased consump-

tion, increased working hours, and sold assets. Households have also been found to change house-

hold composition so that dependent members moved to cheaper regions and working-age members

moved to regions with more job opportunities. There are also negative effects found on education

and health service utilization. The major difference between this study and the previous ones is

twofold. First, this study emphasizes the intra-household allocation of risk-coping, especiall y the

allocation between husband and wife. Therefore this study estimates the effect of the crisis sepa-

rately on married men and women for whom I have information on change in outcomes for both

husband and wife. Second, this study utilizes the regional variation in the severity of the crisis and

tests the association between the regional shock and change in men and women’s outcomes. This

approach is one step further from the majority of studies on the AFC in Indonesia which mainly

compare averages of outcomes before and after the crisis.

4

To measure the severity of the crisis at the regional level, I use the deviation of district con-

sumption growth during the crisis from the pre-crisis trend. Consumption is one of the more accu-

rately measured household outcomes in Indonesia, and has been consistently measured by the

National Social-Economic Household Survey (SUSENAS) for decades. Since SUSENAS is repre-

sentative at the district level, I will be able to track the change in consumption over time at this

level. Change in consumption is also widely used as a measure of the severity of the crisis since

consumption is closely related to households’living standards.

5

To analyze the intra-household allocation of coping mechanisms during the crisis, I need to

look at change in outcomes that can be attributed to individuals instead of just to the household.

Working status or leisure is a standard choice when looking at individual outcomes in the intra-

household allocation literature. Adjusting working status has also been documented as an important

coping mechanism in Indonesia during the AFC. Frankenberg et al. (2003) and Smith et al. (2002)

have found that more women were working during the crisis than before. Therefore it is interesting

to see if changes in working status of women are related to regional shocks. Another mechanism

that is important in the risk and coping literature and also discussed in studies on the AFC in

Indonesia is selling assets.

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Limited research exists on the gender difference in the adoption of this

strategy because it is hard to distinguish household assets that belong to the husband and to the

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