Poverty Dynamics in Indonesia: The Prevalence and Causes of Chronic Poverty

Main Article Content

Lilik Sugiharti
Rudi Purwono
Miguel Angel Esquivias
Ari Dwi Jayanti


This study aims to determine the chronicity of poverty in Indonesia using the equally distributed equivalent (EDE) poverty gap method, tracking Indonesian households in 2007 and 2014. The results indicate that the largest component of poverty among households was chronic (77%). Compared to transient poverty, chronic poverty is more common across individuals. Unlike previous studies, we used data at the district level to measure the poverty line, discovering that the cost of poverty inequality is lower than often reported. This decision is because disaggregated data (poverty line) can show a more realistic poverty threshold. Using a quantile regression approach, we found evidence that age, gender, employment status, and education were significant factors of chronicity. Other significant factors of chronic poverty include large household size, having no access to services (finance, electricity, information, and mobility), and having limited or no assets. Casual employment in the agricultural sector and living in rural areas increase the probability of poverty, although not necessarily chronic. Poverty alleviation programs, therefore, need to target the right causes as exposure to poverty varies across households.


Download data is not yet available.

Article Details

Author Biography

Lilik Sugiharti, Airlangga University, Indonesia

Corresponding author


• Adji, A., & Rachmad, S. H. (2017). Indonesia poverty reduction strategies: Shifting policies to promote employment in the poorest four deciles. Economics and Finance in Indonesia, 63(1), 13–37. https://doi.org/10.7454/efi.v63i1.566

• Aginta, H., Gunawan, A. B., & Mendez, C. (2021). Regional income disparities and convergence clubs in Indonesia: New district-level evidence. Journal of the Asia Pacific Economy, 1–33. https://doi.org/10.1080/13547860.2020.1868107

• Akita, T., & Dariwardani, N. M. I. (2013). Chronic and transient poverty in Indonesia: A spatial perspective with the 2008–2010 Susenas Panel Data. Economics & Management Series, 19, 1–26. https://www.iuj.ac.jp/research/workingpapers/EMS_2013_19.pdf

• Alisjahbana, A. S., & Yusuf, A. A. (2003). Poverty dynamics in Indonesia: Panel data evidence. Department of Economics, Padjadjaran University, 16. http://ceds.feb.unpad.ac.id/wopeds/200303.pdf

• Babbitt, L. G., Brown, D., & Mazaheri, N. (2015). Gender, entrepreneurship, and the formal-informal dilemma: Evidence from Indonesia. World Development, 72, 163–174. https://doi.org/10.1016/j.worlddev.2015.02.019

• Barrientos, A., Hulme, D., & Shepherd, A. (2005). Can social protection tackle chronic poverty? The European Journal of Development Research, 17(1), 8–23. https://doi.org/10.1080/09578810500066456

• Bayudan-Dacuycuy, C., & Lim, J. A. (2013). Family size, household shocks, and chronic and transient poverty in the Philippines. Journal of Asian Economics, 29, 101–112. https://doi.org/10.1016/j.asieco.2013.10.001

• Bella, A., & Dartanto, T. (2018). Persons with disabilities (PWD) and poverty in Indonesia. Malaysian Journal of Economic Studies, 55(2), 167–188. https://doi.org/10.22452/MJES.vol55no2.2

• Booth, A. (1992). The World Bank and Indonesian poverty. Journal of International Development, 4(6), 633–642. https://doi.org/10.1002/jid.3380040605

• Buhai, I. S. (2005). Quantile Regression: Overview and Selected Applications. Ad Astra, 4, 1–17. https://www.ad-astra.ro/journal/7/buhai.pdf

• Cameron, L., Suarez, D. C., & Rowell, W. (2019). Female labour force participation in Indonesia: Why Has it stalled? Bulletin of Indonesian Economic Studies, 55(2), 157–192. https://doi.org/10.1080/00074918.2018.1530727

• Corcoran, M. (1995). Rags to rags: Poverty and mobility in the United States. Annual Review of Sociology, 20(1), 237–267. https://doi.org/10.1146/annurev.so.21.080195.001321

• Dartanto, T., Moeis, F. R., & Otsubo, S. (2020). Intragenerational Economic Mobility in Indonesia: A Transition from Poverty to the Middle Class in 1993–2014. Bulletin of Indonesian Economic Studies, 56(2), 193–224. https://doi.org/10.1080/00074918.2019.1657795

• Dartanto, T. & Nurkholis. (2013). The determinants of poverty dynamics in Indonesia: Evidence from panel data. Bulletin of Indonesian Economic Studies, 49(1), 61–84. https://doi.org/10.1080/00074918.2013.772939

• Dartanto, T., & Otsubo, S. (2016). Intrageneration poverty dynamics in Indonesia: Households’ welfare mobility before, during, and after the Asian financial crisis (Working Paper No. 117). https://www.jica.go.jp/jica-ri/publication/workingpaper/wp_117.html

• De Silva, I., & Sumarto, S. (2015). Dynamics of growth, poverty and human capital: Evidence from Indonesian sub-national data. Journal of Economic Development, 40(2), 1–33. https://doi.org/10.35866/caujed.2015.40.2.001

• Duclos, J. Y., Araar, A., & Giles, J. (2010). Chronic and transient poverty: Measurement and estimation, with evidence from China. Journal of Development Economics, 91(2), 266–277. https://doi.org/10.1016/j.jdeveco.2009.09.002

• Esquivias, M. A., Sethi, N., Ramandha, M. D., & Jayanti, A. D. (2021). Financial inclusion dynamics in Southeast Asia: An empirical investigation on three countries. Business Strategy and Development, 4(2), 203–215. https://doi.org/10.1002/bsd2.139

• Esquivias, M. A., Sugiharti, L., Jayanti, A. D., Purwono, R., & Sethi, N. (2020). Mobile technologies, financial inclusion and inclusive growth in East Indonesia. Journal of Telecommunications and the Digital Economy, 8(2), 123–145. https://doi.org/10.18080/jtde.v8n2.253

• Furno, M. (2007). Parameter instability in quantile regression. Statistical Modelling, 7(4), 345–362. https://doi.org/10.1177/1471082X0700700405

• Geda, A., Jong, N., Mwabu, G., & Kimenyi, M. S. (2001). Determinant of poverty in Kenya: A household level analysis. Institute of Social Studies, 347, 1–20. http://repub.eur.nl/pub/19095/wp347.pdf

• Glewwe, P., & Twum-Baah, K. A. (1991). The distribution of welfare in Ghana, 1987–88 (Working Paper No. 75). World Bank Living Standards Measurement Study. https://experts.umn.edu/en/publications/the-distribution-of-welfare-in-ghana-1987-88

• Haddad, L., & Ahmed, A. (2003). Chronic and transitory poverty: Evidence from Egypt, 1997–99. World Development, 31(1), 71–85. https://doi.org/10.1016/S0305-750X(02)00180-8

• Hahn, J. (1995). Bootstrapping Quantile Regression Estimators. Econometric Theory, 11(1), 105–121. https://doi.org/10.1017/S0266466600009051

• Hanandita, W., & Tampubolon, G. (2016). Multidimensional poverty in Indonesia: Trend over the last decade (2003–2013). Social Indicators Research, 128(2), 559–587. https://doi.org/10.1007/s11205-015-1044-0

• Haughton, J. H., & Khandker, S. R. (2009). Handbook on poverty and inequality. World Bank. http://hdl.handle.net/10986/11985

• Hulme, D., Moore, K., & Shepherd, A. (2001). Chronic poverty: Meanings and analytical frameworks (CPRC Working Paper No. 2). Institute of Development Policy and Management. https://www.chronicpoverty.org/uploads/publication_files/WP02_Hulme_et_al.pdf

• Hulme, D., & Shepherd, A. (2003). Conceptualizing chronic poverty. World Development, 31(3), 403–423. https://doi.org/10.1016/S0305-750X(02)00222-X

• Jalan, J., & Ravallion, M. (2000). Is transient poverty different? Evidence for rural China. Journal of Development Studies, 36(6), 82–99. https://doi.org/10.1080/00220380008422655

• Lipton, M., & Ravallion, M. (1995). Poverty and Policy. Handbook of Development Economics, 3(B), 2551–2657. https://doi.org/10.1016/S1573-4471(95)30018-X

• Mai, T., & Mahadevan, R. (2016). A research note on the poverty dynamics and cost of poverty inequality: Case study of Indonesia. Economic Analysis and Policy, 49, 100–107. https://doi.org/10.1016/j.eap.2015.12.003

• Miranti, R. (2010). Poverty in Indonesia 1984–2002: The impact of growth and changes in inequality. Bulletin of Indonesian Economic Studies, 46(1), 79–97. https://doi.org/10.1080/00074911003642252

• Moeis, F. R., Dartanto, T., Moeis, J. P., & Ikhsan, M. (2020). A longitudinal study of agriculture households in Indonesia: The effect of land and labor mobility on welfare and poverty dynamics. World Development Perspectives, 20, Article 100261. https://doi.org/10.1016/j.wdp.2020.100261

• Muryani, & Esquivias, M. A. (2021). Factors influencing the gender gap in poverty: The Indonesian case. World Review of Entrepreneurship, Management and Sustainable Development, 17(1), 103–119. https://doi.org/10.1504/WREMSD.2021.10034255

• Muryani, Esquivias, M. A., Sethi, N., & Iswanti, H. (2021). Dynamics of income inequality, investment, and unemployment in Indonesia. Journal of Population and Social Studies, 29, 660–678. http://doi.org/10.25133/JPSSv292021.040

• Noerhidajati, S., Purwoko, A. B., Werdaningtyas, H., Kamil, A. I., & Dartanto, T. (2020). Household financial vulnerability in Indonesia: Measurement and determinants. Economic Modelling, 96, 433–444. https://doi.org/10.1016/j.econmod.2020.03.028

• Oktafia, M., Yanuar, F., & Maiyastri. (2016). Analisis estimasi parameter regresi kuantil dengan metode Bootstrap [Analysis of estimated quantile regression parameters with the Bootstrap method]. Jurnal Matematika UNAND, 5(1), 125–130. https://doi.org/10.25077/jmu.5.1.125-130.2016

• Punton, M., & Shepherd, A. (2015, September 9). What is chronic poverty? Findings from the Chronic Poverty Research Centre. ODI. https://www.odi.org/publications/10485-what-chronic-poverty-findings-chronic-poverty-research-centre

• Purwono, R., Wardana, W. W., Haryanto, T., & Khoerul Mubin, M. (2021). Poverty dynamics in Indonesia: Empirical evidence from three main approaches. World Development Perspectives, 23, Article 100346. https://doi.org/10.1016/j.wdp.2021.100346

• Ribas, R. P., & Machado, A. F. (2007). Distinguishing chronic poverty from transient poverty in Brazil: Developing a model for pseudo-panel data (IPC Working Paper No. 36). International Poverty Centre. https://ipcig.org/sites/default/files/pub/en/IPCWorkingPaper36.pdf

• Salehi-Isfahani, D., & Majbouri, M. (2013). Mobility and the dynamics of poverty in Iran: Evidence from the 1992–1995 panel survey. The Quarterly Review of Economics and Finance, 53(3), 257–267. https://doi.org/10.1016/j.qref.2010.04.001

• Santika, T., Wilson, K. A., Budiharta, S., Law, E. A., Poh, T. M., Ancrenaz, M., Struebig, M. J., & Meijaard, E. (2019). Does oil palm agriculture help alleviate poverty? A multidimensional counterfactual assessment of oil palm development in Indonesia. World Development, 120, 105–117. https://doi.org/10.1016/j.worlddev.2019.04.012

• Schaner, S., & Das, S. (2016). Female labor force participation in Asia: Indonesia country study (Working Paper No. 474). Asian Development Bank Economics. https://www.adb.org/publications/female-labor-force-participation-asia-indonesia-study

• Srinivas, H. (2015). Causes of Poverty. In Causes of Poverty. https://www.gdrc.org/sustdev/causes-poverty.html

• Taniguchi, K., & Tuwo, A. (2014). New evidence on the gender wage gap in Indonesia (Working Paper Series, 404). Asian Development Bank Economics. https://www.adb.org/publications/new-evidence-gender-wage-gap-indonesia

• Taufiq, N., & Dartanto, T. (2020). Education, informal turnover and poverty dynamics in Indonesia. International Journal of Economics and Management, 14(1), 157–172. http://www.ijem.upm.edu.my/vol14no1/11)%20Education,%20Informal%20Turnover.pdf

• Todaro, M. P., & Smith, S. C. (2012). Economic development (11th ed). Addison-Wesley.

• Usman, H., & Projo, N. W. K. (2021). Encouraging entrepreneurship for people with disabilities in Indonesia: The United Nations’‘ Leave No One Behind’ promise. Journal of Population and Social Studies, 29, 195–206. http://doi.org/10.25133/JPSSv292021.012

• van Edig, X., & Schwarze, S. (2011). Short-term poverty dynamics of rural households: Evidence from Central Sulawesi, Indonesia. Journal of Agriculture and Rural Development in the Tropics and Subtropics, 112(2), 141–155. https://www.jarts.info/index.php/jarts/article/view/2012011740376

• Wardana, W. W., & Sari, D. W. (2020). Dynamic poverty study: Chronic and transient poverty in Indonesia. International Journal of Innovation, 11(9), 600–622. https://ijicc.net/images/vol11iss9/11923_Wardana_2020_E_R.pdf

• Widyanti, W., Suryahadi, A., Sumarto, S., & Yumna, A. (2009). The relationship between chronic poverty and household dynamics: Evidence from Indonesia (Working Paper No. 132). Chronic Poverty Research Centre. https://smeru.or.id/sites/default/files/publication/chronicpovertyhouseholddynamics.pdf

• Wooldridge, J. M. (2012). Introductory Econometrics: A Modern Approach (5th ed.). Michigan State University.