Education Expenditure Responses to Crop Loss in Indonesia: A Gender Bias

Abstract

This paper examines the impact of transitory income on educational expenditure using data from the 1993 Indonesian Family Life Survey covering a sample of 7224 households across 13 provinces in Indonesia. Also it investigates whether households are able to smooth consumption. Several assumptions were made in this paper. First it obtains estimates of permanent and transitory income. Second it studies the educational expenditure instead of the total expenditure or savings. Third it examines gender differences in educational expenditure after crop loss. Overall data show that the self-reported measures that the respondents took to overcome crop loss suggest that not all farm households are capable of smoothing consumption in the face of income shocks. Of the households that reported a crop loss in 1993 34% reported that they cut expenditure which may be due to lack of access to credit markets or labor markets. Considering the socially valuable category of educational expenditure it is noted that the households reporting a cutback on expenditure have a marginal propensity to consume education. The estimate of the marginal propensity to spend on education out of transitory income is 0.822 and strongly significant for households that reported cutting back on expenditure and having girls of school age. This research suggests that providing subsidies for girls education may be a suitable way of targeting educational policies.