Working Paper: June 2000

Measurements of Poverty in Indonesia: 1996, 1999, and Beyond

Menno Pradhan (Free University), Asep Suryahadi (SMERU),
Sudarno Sumarto (SMERU), Lant Pritchett (World Bank)*

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Abstract

The economic crisis has caused a clear deterioration in the welfare of the people of Indonesia. While there are many dimensions to individual and family welfare, here we focus on only one: a consumption expenditures based measure of "poverty." Even within the measurement of poverty we address only two issues.

The first issue is how to produce regionally consistent poverty lines, i.e. how to define a level of money expenditures for each region that produces the same material standard of living. We use an internally consistent method to set the reference population yielding weights for a Laspeyres price index used to deflate prices across regions and over time. Choosing the "reference population" is important because dietary patterns vary systematically as households get richer. To address this circularity we use an iterative approach to defining the poverty lines that produce consistent results across regions. We then use these poverty lines to examine the common "poverty profiles" (e.g. by location, sector, etc.)

The second issue is more conceptual and discusses possible extensions to the very narrow measurement of poverty based on consumption by considering extensions which pursue the goal of making consistent comparisons of welfare levels between individuals.

* This report is based on the full SUSENAS sample of 65,000 households. We update the same methodology previously applied to the accelerated sample of 10,000 households. We thank Wenefrida Dwi Widyanti and Yusuf Suharso for their research assistance. We are grateful to BPS for providing access to the data.