Changes in Household Welfare, Poverty and Inequality During the Crisis

This study provides evidence about changes in the distribution of living standards among Indonesian households during the economic crisis. It uses consumption expenditure data from a panel of households that were surveyed in May 1997, just before the onset of the crisis, and then again in August 1998, about a year after the crisis began. A household-specific deflator is used to make nominal consumption expenditures comparable across this period. The results suggest that there was a considerable drop in household welfare during the economic crisis. Average per capita expenditures fell significantly, and at the same time inequality increased. The poverty rate also appears to have doubled from the pre-crisis level. However, transitions into and out of poverty before and after the crisis reveal remarkable fluidity.