Poverty Measurements Mismatch and Its Policy Relevance: The Case of Indonesia

This is the authors' abstract. We don't add key points for this paper.

A fundamental mismatch between monetary and non-monetary poverty dimensions can severely undermine policy targeting. This study analyses this mismatch and its policy relevance in Indonesia, comparing monetary poverty with four multidimensional frameworks – the Multidimensional Poverty Index (MPI) and Multidimensional Poverty Measure (MPM) – differentiated by individual and household units of identification. Using 2020 Susenas data, we find this discrepancy translates into a substantial gap between programme receipt and the specific non-monetary deprivations these programmes aim to address, with over 80% of nutritionally and educationally deprived individuals not receiving the respective programmes. Our simulations show the MPI framework achieves higher coverage of these non-monetary deprivations compared to the monetary or MPM approaches, under the specifications used in this study. However, the optimal instrument is nuanced: while household-level identification generally achieves broader coverage, individual-level identification achieves higher coverage for deprivations marked by intrahousehold inequality, such as accumulated schooling. We conclude that complementing the official monetary measure with a national MPI offers a promising avenue for designing policies that more effectively address poverty in all its dimensions.