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Contents Introduction

When characteristics of the poor are examined with respect to several important variables, a relative incidence of poverty varies greatly with respect to education and the sector of work of a household head. It is greater than one when educational level is less than junior high school in rural areas. When a household head finished junior high school or higher, his relative incidence of poverty is far smaller than one. It may imply that providing higher education is essential to reduce rural poverty in Indonesia in the long run. However, a rate of increase in household expenditure to an additional year of education is almost zero in the agricultural and manufacturing sectors in rural areas. This fact indicates that although a household head finishes education higher than junior high school, he may not be able to raise his household expenditure as long as he stays in the agricultural and rural manufacturing sectors. This implies that education alone will not solve a poverty problem in rural areas.