Are Schooling and Roads Complementary? Evidence from Income Dynamics in Rural Indonesia

• Published in: World development Vol. 39; no. 12; pp. 2232 - 2244
• Main Authors: Yamauchi, Futoshi, Muto, Megumi, Chowdhury, Shyamal, Dewina, Reno, Sumaryanto, Sony
• Format: Journal Article
• Language: English
• Published: Oxford Elsevier Ltd 01-12-2011; Pergamon Press Inc
• Subjects: Benefits; Census; Data analysis; Economic Development; Economics; Education; employment; Family income; Highways; Household income; Households; Income; income growth; Indonesia; Labor; Labor economics; Labor Supply; Labour supply; landholding; Markets; Road network; Roads & highways; Rural Areas; Rural Development; Rural economics; rural economy; Rural life; Schooling; Spatial Analysis; spatial connectivity; Studies; Sustainable development; Transport infrastructure; Villages; Indonesia; spatial connectivity; education; income growth; rural economy; landholding; Indonesia
• ISSN: 0305-750X; 1873-5991
• DOI: 10.1016/j.worlddev.2011.04.003

We examine the impact of spatial connectivity on household income growth and non-agriculture labor supply in Indonesia by combining household panel data and village census data during the period of 1995–2007. Our empirical results show that the impacts of improved local road quality on income growth and the transition to non-agricultural labor markets depend on household education and distance to economic centers. In particular, post-primary education significantly increases the benefit from the improvement of local spatial connectivity in remote areas, promoting labor transition to non-agricultural sectors. Education and local road quality are complementary, mutually increasing non-agricultural labor supply and income in remote areas. In contrast, the initial landholding size does not affect the benefit from improved road quality.