The dynamics of rural transformation, household income, and poverty reduction: Case study in North Sumatra, Indonesia

¹ Research Center for Behavioral and Circular Economics National Research and Innovation Agency, Jakarta 10340, Indonesia
² Research Center for Economics of Industry, Services, and Trade National Research and Innovation Agency, Indonesia
³ Indonesian Center for Agriculture Socio-Economic and Policy Studies, Indonesia

^* Corresponding author: rikareviza@rocketmail.com

Abstract

Rural transformation (RT) is a process in which the agricultural system undergoes transformation towards off-farm, commercial, and market-oriented ones. The research objective is to analyze the dynamics of rural transformation, farmer incomes, and poverty in rural areas in North Sumatra. This study used secondary data from Statistics Indonesia and analyzed using descriptive and tabular methods. The results show that the agricultural structure has shifted over the last two decades from low-value commodities (food crops) to high-value commodities. At the same time, non-farm employment opportunities also showed an increase. The development of high-value commodities and non-farm sectors has also contributed to reducing rural poverty rates. The plantation sub-sector is the highest contributor to agricultural GDP in North Sumatra and tends to increase yearly, in addition to the livestock and horticulture. The non-agricultural industry began to increase and contributed significantly to GDP. Per capita income in 2011-2020 has increased. Poverty depth and severity are still below the national average, meaning that efforts to alleviate poverty have been relatively successful to increase incomes and reduce poverty in rural areas, one of the strategies that need to be taken is to encourage the development of high-value commodities and expand non-agricultural employment opportunities in rural areas.