A presentation by Wenefrida Widyanti, Asep Suryahadi, Sudarno Sumarto, and Athia Yumna from the 2009 BASIS Conference on "Escaping Poverty Traps: Connecting the Chronically Poor to the Economic Growth Agenda."

1. Household Dynamics,
Chronic Poverty and
Social Protection in Indonesia
Wenefrida Widyanti†
, Asep Suryahadi,
Sudarno Sumarto and Athia Yumna
The SMERU Research Institute
www.smeru.or.id

2. 2
Outline
1. Introduction
2. Data
3. Poverty and Chronic Poverty in Indonesia
4. Household Composition Change and Chronic Poverty
5. Household Dynamics as a Protection Instrument
6. Economic Viability and Chronic Poverty
7. Household Dynamics and the Concept of Chronic Poverty
8. Household Dynamics and Social Protection
9. Conclusion

3. 3
Introduction
 A typical household usually consists of several individuals with different
characteristics, including their economic capacities, which in the end
determines the economic capacity of the household as a unit.
 A change in household composition will affect the economic capacity and
economic condition of a household and most likely entail simultaneously
both positive and negative effects on a household’s economic capacity and
economic condition.
 The direction of causation can also go in the opposite direction. A change in
the economic condition of a household can induce the household to change
its household composition.
 The existence of relationships between household composition and
household’s economic capacity and condition indicates that household
composition may play an important role in explaining why some households
fall into chronic poverty (i.e. severe and persistent poverty).

4. 4
Data
 Indonesia Family Life Survey (IFLS) Data from RAND, a longitudinal
household survey with a sample which is representative of about 83
percent of the Indonesian population (13 provinces in Indonesia):
 IFLS1 was conducted in 1993/94 by RAND in collaboration with the
Demographic Institute of the University of Indonesia (LDUI)  7,224
households (over 22,000 individuals) were interviewed.
 IFLS2 was subsequently conducted in 1997 by RAND in collaboration with
UCLA and LDUI  94% of IFLS1 households were relocated and re-
interviewed + 878 split-off households (over 33,000 individuals) were
interviewed.
 IFLS3 was fielded in 2000, conducted by RAND in collaboration with the
Centre for Population and Policy Studies, Gadjah Mada University (PSKK-
UGM)  10,400 households (around 39,000 individuals) were interviewed.
 A complete panel of 6,403 households were interviewed in IFLS1, IFLS2 and
IFLS3.

5. 5
Poverty and Chronic Poverty in Indonesia (1)
Table 1. Poverty Indicators of Panel Data Households (%)
Indicator 1993 1997 2000
Poverty headcount (P0) 23.05 14.56 15.02
Poverty gap (P1) 6.79 3.87 3.70
Poverty severity (P2) 2.92 1.56 1.37
Number of observations (N) 6,403 6,403 6,403
Source: Authors’ calculation using IFLS data
 There was clear improvement in the household welfare between 1993 and
1997; however, due to the advent of an economic crisis starting in the
second half of 1997, there was stagnation in household welfare between
1997 and 2000.

6. 6
Poverty and Chronic Poverty in Indonesia (2)
Table 2. Poverty Dynamics of Panel Data Households
Poverty Pattern 1993 1997 2000 Incidence (%)
Always poor Poor Poor Poor 4.23
Poor Poor Not poor 4.33
Poor Not poor Poor 3.56
Twice poor
Not poor Poor Poor 2.00
9.89
Poor Not poor Not poor 10.93
Not poor Poor Not poor 4.00
Once poor
Not poor Not poor Poor 5.23
20.16
Never poor Not poor Not poor Not poor 65.72
Number of observations (N) 6,403
Source: Authors’ calculation using IFLS data
 Always poor + twice poor  chronic poor (14.1%)
 Once poor  vulnerable (20.2%)
 Never poor  non-poor (65.7%)

7. 7
Household Composition Change and Chronic Poverty (1)
Table 3. Household Distribution by Poverty Groups across the Existence of Household
Composition Change (%)
Existence of Household Composition
Change
Chronic
Poor
Vulnerable Non-poor N
No change in composition 15.00 19.10 65.90 2,173
Experienced change in composition 13.66 20.71 65.63 4,230
Total 14.12 20.16 65,72 6,403
Source: Authors’ calculation using IFLS data
 The distributions by poverty groups of both households that
experienced household composition change and those that did not
are similar to each other as well as to the total distribution 
Household composition change is not a major cause of the chronic
poverty phenomenon in Indonesia

8. 8
Household Composition Change and Chronic Poverty (2)
Table 4. Household Distribution by Poverty Groups across the Types of Household Composition
Change (%)
Type of Composition Change
Chronic
Poor
Vulnerable Non-poor N
Death of breadwinner 0.00 33.33 66.67 12
Death of other household member 15.00 15.00 70.00 20
Birth of a child 11.81 15.28 72.92 288
Divorce or separation 21.43 14.29 64.29 14
Additional working adult 14.34 20.58 65.08 1,074
Additional non-working adult 13.92 21.30 64.78 2,723
Others 5.05 22.22 72.73 99
Total 13.66 20.71 65.63 4,230
Source: Authors’ calculation using IFLS data
 The distributions by poverty groups of the households which experienced
household composition change by the type of the composition change that
occurred are similar to the total distribution (except divorce or separation but based
on a small number of observations)  There is no evidence that certain types of
household composition change cause a higher probability for households to be
chronically poor

9. 9
Household Dynamics as a Protection Instrument
Table 5. The Proportions of Households Having a Bad State in Previous Period among
Those which Experienced Household Composition Change (%)
Bad State in Previous Period 1997 2000
Poverty:
- Poor in previous period 21.99 14.59
- Not poor in previous period 78.01 85.41
N 4,230 4,230
Unemployment:
- Head unemployed in previous period 15.26 20,52
- Head employed in previous period 84.74 79,48
N 4,155 4,006
Source: Authors’ calculation using IFLS data
 The proportion of bad state households among those that experienced a change in
household composition is similar to the total households  There is no evidence
that households change their composition to cope with poverty and unemployment.

10. 10
Economic Viability and Chronic Poverty
Table 8. Results of Ordered Probit of the Effects of Household Composition on the Probability
to be Chronic Poor or Vulnerable
Chronic Poor VulnerableIndependent
Variable Coefficient Std. Error Coefficient Std. Error
Household composition:
Husband-wife with
children households
0.01592 0.02367 0.01416 0.02190
Single male/father with
and without children
households
0.08498 0.06077 0.05223 * 0.02562
Single female without
children households
-0.11640 ** 0.00477 -0.21484 ** 0.00591
Single mother with
children households
0.01100 0.03290 0.00901 0.02580
Other household
compositions
0.06705 * 0.03200 0.04668 ** 0.01784
Household
characteristics:
Number of household
members
0.02383 ** 0.00188 0.02035 ** 0.00174
Dependency ratio -0.00003 0.00004 -0.00002 0.00003
Proportion of male in a
household
-0.00008 0.00019 -0.00007 0.00016
Proportion of adult in a
household
0.03525 0.02767 0.03011 0.02368
Proportion of working
household members
0.02319 * 0.01204 0.01981 * 0.01028
Proportion of household
members with secondary
education or higher
-0.61423 ** 0.02719 -0.52458 ** 0.03156
Note: The independent variables used in the model are based on 1993 data.
** Significant at 1%
* Significant at 5%
 Single female without children
households have the lowest
probability to be either
chronically poor or vulnerable,
while single father households
have the highest probability to
be vulnerable.
 The larger the number of
household members, the higher
the probability a household to be
chronically poor or vulnerable.
 Higher proportion of household
members with senior secondary
or higher education reduces the
probability of a household to be
either chronic poor or
vulnerable.

11. 11
Household Dynamics and the Concept of Chronic Poverty
Table 9. Poverty Headcount Rates for Various Household Groups in the Data (%)
Poverty Headcount (%)
Population Group
1993 1997 2000
N
First round households:
- First round households in the
complete panel
23.05 14.56 15.02 6,403
- First round households visited in the
second round but not visited in the
third round
14.93 5.97 – 201
- First round households not visited in
the second round but visited in the
third round
12.07 – 10.34 232
- First round households not visited in
the second and third rounds
10.00 – – 300
- Total first round households
21.92
(N=7,136)
14.29
(N=6,604)
14.86
(N=6,635)
7,136
Second round households:
- New households in the second
round visited in the third round
– 8.94 11.91 705
- New households in the second
round not visited in the third round
– 13.39 – 224
- Total second round households –
10.01
(N=929)
11.91
(N=705)
929
Third Round Households:
- New households in the third round – – 9.30 2,818
All Households in the Data
21.92
(N=7,136)
13.77
(N=7,533)
13.11
(N=10,158)
10,883
Source: Authors’ calculation using IFLS data
 The complete panel
households are poorer than
the total sample in each
round:
 The households dropped
out of sample are less
poor
 The new households
added into sample are
less poor
 The use of household as the
unit of analysis for poverty
may undermine the
conceptualisation &
measurement of chronic
poverty.

12. 12
Household Dynamics and Social Protection
 Poverty status in general does not increase the probability of receiving assistance,
except for the vulnerable in receiving basic need assistance.
 Change in household composition does not increase the probability of receiving
assistance either.
Table 12. Results of probit analysis of household participation in government social
protection programmes in 2000 (%)
Basic needs assistance Other assistances
Independent variable
Coefficient Std. Error Coefficient Std. Error
Poverty status:
Chronically poor 0.33698 0.22719 0.12199 0.42655
Vulnerable 0.29597 ** 0.10773 -0.02686 0.20418
Poor in 1993 0.03295 0.10902 -0.13284 0.20336
Poor in 1997 -0.06977 0.10596 -0.08762 0.20563
Poor in 2000 0.12706 0.10269 -0.09073 0.19605
Change in household
composition:
Change in household
composition 1993-1997
0.07934 0.04978 0.07779 0.08664
Change in household
composition 1997-2000
0.01345 0.04076 -0.00663 0.07303
Household characteristics:

13. 13
Conclusion (1)
 Household composition change is not a major cause of the
chronic poverty phenomenon in Indonesia.
 There is no evidence that certain types of household
composition change cause a higher probability for households
to be chronically poor.
 There is no evidence that households change their composition
to cope with poverty as well as unemployment.
 Husband-wife households have the highest probability to be
non-poor, while single mother households have a higher
probability to be non-poor than single father households.

14. 14
Conclusion (2)
 The larger the number of household members, the higher the
probability a household to be chronically poor or vulnerable.
 A higher proportion of household members with senior
secondary or higher education reduces the probability of a
household to be either chronic poor or vulnerable.
 Because of household dynamics, the use of household as the
unit of analysis for poverty could undermine the
conceptualisation & measurement of chronic poverty.
 Poverty status and change in household composition in general
do not increase the probability of a household to receive an
assistance.

15. 15