Education and Expenditure Inequality in Indonesia and the Philippines: A Comparative Analysis in an Urban and Rural Dual Framework

Using nationwide household surveys, this study investigates the roles of education in expenditure inequality in two archipelagic Asian countries: Indonesia and the Philippines. Since disparity between urban and rural areas is one of the main determinants of expenditure inequality and there is a large difference in educational endowments between urban and rural areas, an analysis is conducted in an urban-rural framework. Both countries achieved a notable reduction in expenditure inequality in the 2010s. In Indonesia, the reductions of disparity between education groups and tertiary education group’s within-group inequality in urban areas were the main contributors to the reduction of overall expenditure inequality. In the Philippines, the reductions of expenditure disparities between urban and rural areas and between education groups were the main contributors to the reduction of overall expenditure inequality. In 2018, Indonesia and the Philippines had the same level of expenditure inequality. However, compared to developed countries, their expenditure inequalities are still very high. In Indonesia, expenditure inequality among those with secondary education is the major determinant of overall expenditure inequality. Thus, reducing the secondary group’s within-group inequality is necessary. At the same time, the tertiary group’s within-group inequality should be decreased in urban areas. In the Philippines, expenditure inequality among those with tertiary education is the major determinant of overall expenditure inequality. Thus, reducing the tertiary group’s within-group inequality is imperative. At the same time, the disparity between education groups should be decreased in both urban and rural areas.