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Educational Expansion and the Role of Education in Expenditure Inequality in Indonesia Since the 1997 Financial Crisis

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Abstract

Based on the National Socio-Economic Survey (Susenas) from 1997 to 2011, this study examines the role of education in expenditure inequality in Indonesia under educational expansion since the 1997 financial crisis. This is achieved using the three decomposition methods: the Blinder–Oaxaca decomposition; the decomposition of the Gini coefficient; and the hierarchical decomposition of the Theil index. The expansion of education, particularly basic education in rural areas, appears to have not only lowered educational disparity between the urban and rural sectors but also educational inequality within the rural sector. Due in large part to the declining educational disparity between the urban and rural sectors, the urban–rural expenditure disparity has narrowed since the mid-2000s. On the other hand, the expansion of higher education in urban areas appears to have played an important role in the recent rise in overall expenditure inequality by raising not only disparity between educational groups but also inequality within the tertiary education group. Basic education policies would still serve as an effective means to mitigate expenditure inequality, as they could reduce not only educational gap between the urban and rural sectors but also educational inequality within the rural sector by raising general educational levels. Since the expansion of higher education in urban areas seems to be one of the main factors of the recent rise in overall expenditure inequality, higher education policies would also be crucial.

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Notes

  1. Two decentralization laws, i.e., Law 22 on Regional Administration and Law 25 on the Fiscal Balance between the Central and the Regional Governments, were enacted in 1999 and implemented in 2001.

  2. Though Indonesia has not achieved universal completion of primary education, it has shifted its attention to junior secondary education since the mid-1990s (Jones and Hagul 2001; Suryadarma and Jones 2013). According to Suharti (2013), about 80 % of pupils entering primary school actually graduated in academic year 2007/08 and 66 % of them continued to junior secondary education.

  3. See for example, Knight and Sabot (1983), Ram (1989), Ram (1990), Park (1996), Chu (2000), Lin (2006).

  4. In this study, educational expansion implies an increase in the proportion of households whose heads have completed at least secondary education, whether it is led by government policies or not, while the expansion of higher education means an increase in the proportion of households with tertiary education.

  5. See for example, Hughes and Islam (1981), Islam and Khan (1986), Asra (1989), Akita and Lukman (1999), Akita et al. (1999), Asra (2000), Akita and Miyata (2008), Akita and Miyata (2013), Sagala et al. (2014), and Hayashi et al. (2014).

  6. In 2011, Susenas was conducted quarterly; thus for 2011, we used the Susenas dataset that was constructed by merging four quarterly Susenas by CBS. Since there might have been seasonal variations in expenditure inequality across quarters, some care should be taken in interpreting the result.

  7. Our result confirms the result of Hayashi et al. (2014), which states that the difference in educational endowments explains about 36 % of the urban–rural expenditure gap.

  8. The result is presented in Table 5.

  9. In most other countries, differences in educational attainment account for 20–40 % of overall inequality. See, for example, Glewwe (1986), Tsakloglou (1993), Estudillo (1997), Rao et al. (2003).

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Acknowledgments

We are grateful to the Japan Society for the Promotion of Science for its financial support (Grant-in-Aid for Scientific Research Nos. 15K03458 and 15K03473). We would also like to thank anonymous reviewers for their helpful comments and Heryanah for obtaining the necessary data for our analysis.

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  1. College of Business, Rikkyo University, 3-34-1 Nishi-Ikebukuro, Toshima-ku, Tokyo, 171-8501, Japan

    Takahiro Akita

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Akita, T. Educational Expansion and the Role of Education in Expenditure Inequality in Indonesia Since the 1997 Financial Crisis. Soc Indic Res 130, 1165–1186 (2017). https://doi.org/10.1007/s11205-015-1208-y

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