Our Expertise
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.
Designing and implementing social safety net programs in 1998 was a new experience for Indonesia. The severe social impacts of the crisis, which began in mid 1997, forced the government to act rapidly to safeguard real incomes and access to social services for the poor by instituting new and expanded programs.
Using cross-section data from household surveys, we estimate several categories of household poverty and vulnerability in Indonesia by combining the available information on current consumption levels, estimates of vulnerability to poverty, and estimates of expected consumption levels.
The potential benefits of accurate targeting are substantial because public expenditures can be concentrated to the needy, thereby saving money and improving program efficiency. However, targeting also entails administrative costs associated with identifying, reaching, and monitoring potential beneficiaries.
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.
