The multidimensional approach to poverty measurement in Indonesia: Measurements, determinants and its policy implications

The notion of poverty is diverse, dynamic, and multidimensional. Conventional poverty measurement using either the consumption or the income approach is insufficient for explaining the multiple deprivations faced by the poor. Therefore, this study aims at analyzing a multidimensional poverty measurement in Indonesia. Applying Alkire and Foster’s multidimensional framework and utilizing the 2011 National Socio-Economic Survey Indonesia, this study confirmed that the monetary measurement of poverty should be complemented with the multidimensional poverty measurement to capture a comprehensive picture of deprivation in Indonesia. Around 61% of populations categorized as non-poor by the conventional poverty measurement are still categorized as poor using the multidimensional poverty measurement. Although Spearman’s rank correlations shows that both poverty measurements at the provincial level are weakly correlated, our econometric estimations confirmed that both determinants of poverty are relatively similar – for instance, a higher educational attainment of the household head leads to a higher probability of being non-poor in terms of both monetary and multidimensional poverty. Our study also identifies that a health indicator is the major source of multidimensional poverty in Indonesia; therefore, a universal health program launched in 2014 is important for tackling multidimensional poverty as well as improving human capital.