Urban-Rural Differences in Costs of Living and their Impact on Poverty Measures

Publication | February 1999

This note demonstrates empirically the importance of urban–rural price differences and inflation figures in poverty analysis in Indonesia.

Using data from the National Socio-Economic Survey (Survei Sosial Ekonomi Nasional, widely known as Susenas), it shows that the urban–rural food price differential during the period 1987–1996 was 13%–16%, not 28%52% as implied by the 'official' food poverty lines. The urban–rural poverty comparisons and the components of change in simulated poverty estimates presented here therefore differ from those based on the 'official' figures. They indicate that migration to urban areas between 1987 and 1996 accounts for a significant part of the observed decline in poverty. The paper concludes that it is essential to use accurate urban-rural cost of living differences in deriving aggregate, urban and rural poverty estimates.


  • Introduction
  • Overall Poverty and Food Poverty
  • Data
  • Methodology
  • Results
    • Ratios of Urban to Rural Prices
    • Poverty Measurement and Analysis Using Spatially Consistent Food Price Ratios
    • Changes in Food Prices over Time
    • Improved Poverty Measurement and Analysis Using Observed Ratios of Urban to Rural Prices and Inflation
  • Concluding Remarks
  • References

Additional Details

  • Agriculture and natural resources
  • Poverty
  • Urban development

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