Abstract
This study on Indonesia decomposes poverty gap using the equally distributed equivalent method and by tracking the poverty status of the same households over four time periods. Empirical evidence shows that unlike all previous studies on Indonesia, chronic poverty was far more prevalent than transient poverty over time. This was robust for developed and less developed provinces, Islamic and non-Islamic groups, and for various education levels of the household head. In addition, it was found that narrowing the cost of inequality in the poverty gap between households holds the key to reducing chronic poverty. This calls for a rethink of the poverty alleviation programs in place for a more targeted focus.
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