Revealing the Role of Livelihood Strategies in Shaping Multidimensional Poverty Dynamic: Evidence from Rural Indonesia

Poverty alleviation represents a significant global challenge, particularly for developing countries. This issue was recognized as the primary Sustainable Development Goal in 2015. Poverty is a complex, multidimensional phenomenon that cannot be adequately measured by a single indicator. Households frequently transition in and out of multidimensional poverty due to various factors, including household livelihood strategies. This study aims to explore the dynamics of multidimensional poverty and livelihood strategies in rural Indonesia, analyze their relationship through the lens of the Sustainable Livelihood Approach. Utilizing panel data from the Indonesian Family Life Survey covering 4,593 households across 2007 and 2014, the research applies the Alkire-Foster method to assess multidimensional poverty status and employs cluster analysis to classify livelihood strategies. The findings reveal that among the 23.88 of households identified as multidimensionally poor in 2007, 8.67 stayed poor in 2014, while 15.22 successfully transitioned out of poverty. Conversely, 4.29 of households moved into poverty. Living standard was the most significant dimension, while years of schooling was the largest indicator to multidimensional poverty in rural Indonesia. Notably, 54.63 of households retained their initial livelihood strategies, while 45.37 of households adapted to changing conditions and opportunities. Wage labor and business and self-employment constituted the predominant livelihood strategy, although their ranking has been reversed over the two periods. Agricultural livelihood strategies in 2007 were identified as a significant determinant of households' ability to escape poverty, besides other age and working status of the household head factors. However, these households also faced higher risks of stay poor compared to other strategies. These findings suggest policy implications for improving the range of livelihood choices available to households to move out of the poverty trap. © 2025 The authors. This article is published by IIETA and is licensed under the CC BY 4.0 license (http://creativecommons.org/licenses/by/4.0/).