The determinants of poverty dynamics in Indonesia: evidence from panel data

We use the ‘spell’ approach to identifying poverty and apply an ordered logit model to examine the determinants of poverty dynamics in Indonesia, categorising households as poor, transient poor (–), transient poor (+) or non-poor. Observing the National Socio-Economic Survey (Susenas) balanced-panel data sets of 2005 and 2007, we found that 28% of poor households are classified as chronically poor (that is, remaining poor in two periods) while 7% of non-poor households are vulnerable to being transient poor (–). Our estimations confirmed that the determinants of poverty dynamics in Indonesia are educational attainment, the number of household members, physical assets, employment status, health shocks, the microcredit program, access to electricity, and changes in employment sector, employment status and the number of household members. We also found that households in Java–Bali are more vulnerable to negative shocks than those outside Java–Bali.