Roles of Education in Expenditure Inequality between Urban and Rural Areas: Indonesia, the Philippines, and India

This study selects Indonesia, the Philippines, and India among Asian developing countries and, based on household survey data, examines the determinants of urban–rural disparities in per capita consumption expenditure in these three countries, with a focus on education, using the Blinder–Oaxaca decomposition method. In both Indonesia and India, inequality in per capita consumption expenditure, as measured by the Theil index, tended to expand during the observation period. In the Philippines, inequality in per capita expenditure improved over the period, although the level of inequality still remains high. The share of inequality between urban and rural areas is relatively lower than that of inequality within urban and rural areas, due to the use of the conventional Theil decomposition method. However, the gaps between urban and rural areas are not small enough for their impact to be ignored, when using Elbers’ alternative decomposition approach as a supplementary tool for the conventional Theil decomposition method. This study therefore attempts to decompose the differences in mean per capita consumption expenditure between urban and rural areas into several household features, including education, using the Blinder–Oaxaca decomposition method. As a result, in Indonesia, the Philippines, and India, differences in educational endowments appear to have been a key determinant of urban–rural disparity, accounting for approximately 30–60% of the urban–rural expenditure gap. In addition, differences in job sectors (agricultural sector vs non-agricultural sector) also contribute to the expenditure gap, albeit to a lesser extent.