The economics of Kretek rolling in Indonesia

This report identifies the socioeconomic and labor market characteristics of kretek workers and their households from two large kretek producing districts. The analysis in this report is based on data collected from a sample survey of 720 kretek workers’ households from two large kretek producing districts, Kudus and Malang. The details of the survey methodology are provided in appendix A. The purposive selection of sample districts is driven by a high degree of regional concentration of kretek factories. Based on the annual Survey of Industry (SI), 40 percent of Indonesian kretek workers are in three districts only, Kudus (21.4 percent), Kediri (10.2 percent), and Malang (8.6 percent) (World Bank, 2017a). This report consists of six sections, including this introduction. The next section, section two, describes the socioeconomic profile of kretek workers and their households. In section three, the labor market characteristics of kretek workers are discussed. The livelihood status of kretek workers are covered in section four. Section five presents the simulated results of the impacts of cigarette excise tax policy reform on the livelihood of kretek workers. Finally, section six concludes with the summary of findings and policy recommendations.