The Roles of Location and Education in the Distribution of Economic Well-being in Indonesia: Hierarchical and Non-hierarchical Inequality Decomposition Analyses

This paper analyzes the roles of location (rural and urban sectors) and education in the distribution of economic well-being in Indonesia by employing the hierarchical and non-hierarchical decomposition methods of the Theil indices. This is done by using household expenditure data from the national socio-economic survey (Susenas) in 2008. It shows that there are large expenditure disparities across education levels but that these are more pronounced in the urban sector than the rural sector. When there are differences in educational structure between the rural and urban sectors, the hierarchical decomposition method appears to offer a better approach than the non-hierarchical method.