Working Paper: September 2001

Short-term Poverty Dynamics: Evidence from Rural Indonesia

Wenefrida Widyanti, Sudarno Sumarto, Asep Suryahadi*

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Abstract

During the economic crisis, the headcount poverty rate in Indonesia changed relatively quickly in short periods of time, implying that there were a large number of households which moved in and out of poverty relatively frequently and experienced relatively short periods of poverty. This study finds that changes that took place at the household level were greater than what were indicated by the aggregate figures. During a certain period, the proportion of households which fell into poverty is negatively correlated with the proportion of households which moved out of poverty. However, the total number of households which experienced a change in their poverty status have always been found to be substantial and much greater than the change in poverty rate. Hence, looking only at the changes in the total poverty rate could give a misleading impression on the actual poverty dynamics of households.

*We thank Statistics Indonesia (BPS) and UNICEF for providing access to the data. We are grateful to Kristen Stokes who has edited the manuscript.

Table of Contents

I. INTRODUCTION

II. DATA AND CONSTRUCTION OF THE POVERTY LINE

2.1. Data
2.2. Construction of the Poverty Line

III. INCOME, CONSUMPTION, AND POVERTY DYNAMICS

3.1. Macroeconomic Background
3.2. Changes in Income, Consumption, and Poverty
3.3. The Pattern of Changes in Poverty Status

IV. CONCLUSIONS

REFERENCES

APPENDIX