IJSTR >> Volume 9 - Issue 12, December 2020 Edition

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AUTHOR(S)

Kholifatul Mar’ah, Munawar Ismail

KEYWORDS

Expenditure Inequality, Inequality decomposition, Education, Urban-Rural, Theil L.

ABSTRACT

This study examines the trend in the urban–rural expenditure inequalities in Indonesia from 2015–2018 based on National Socioeconomic Survey data from the same period. Subsequently, it explores to what extent the educational attainment affects expenditure inequality, by using two inequality decomposition methods, Blinder–Oaxaca decomposition and Theil inequality decomposition. The findings reveal that, first, the difference in educational attainment contributes to more than 39% of urban–rural inequality. Second, according to the results of the hierarchical decomposition of expenditure inequality using the Theil L index, the expenditure inequalities between urban–rural areas are minor. In contrast, those within the areas are more significant. Third, the senior high school group has the highest contribution to overall inequality in urban areas; meanwhile, the elementary school group plays a prominent role in rural areas. Policymakers should therefore focus on narrowing the urban–rural gap through policies aimed at the allocation of “village transfer” for the education sector in rural areas.

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