Poverty and vulnerability transitions in Indonesia before and during the COVID-19: insights from synthetic panels

The study on poverty dynamics has become more critical during the COVID-19 pandemic. This study gives insights into the scale of poverty and vulnerability transitions for 2019–2020 and the characteristics associated with each transition. Since panel data are unavailable for Indonesia, this study uses cross-sectional data and demonstrates the synthetic panels approach. The finding shows that the COVID-19 has induced poverty persistence in Indonesia as the economic shutdown took place. However, the pandemic impact is not uniformly distributed among Indonesian households. Those who fell into poverty during the pandemic most likely came from the vulnerable group, especially those living in rural areas, illiterate or with less education. The findings of this study, therefore, underlines the importance of literacy and education in poverty alleviation. This paper also highlights the urgency for redesigned poverty interventions as the economic shock has created new vulnerable groups. Higher probability of becoming vulnerable to poverty during the pandemic is associated with living in urban areas, having females as the household head, being a university graduate, and working in service sectors. Lastly, this study found that the synthetic panel estimates are sensitive to the assumptions made and how the key parameters are estimated.