Overcoming the Poverty Trap Through Education: An Intergenerational Study on Indonesia

Abstract

Poverty has an inter-generational dimension. Individuals born into poor families are constrained to obtain education. Low education leads to low productivity which then leads to low income. The purpose of this study is to present a case study of Indonesia's experience with public expenditures on education and its effect on inter-generational poverty alleviation and medium term impact on individual income. This study uses Indonesian Family Life Survey (IFLS) data consisting of families' income, level of education, and health data over a ten year period. The results suggest that education explains the income variation. Parents' income plays a bigger role in predicting children's income than parents' income. It suggests the importance of education in breaking the inter-generational poverty trap.

Assessing the Role of Education on Intergenerational Income Mobility: The Case of Indonesia

“…This concludes that the parental resources play a significant role in the child's income rather than their own efforts, abilities, and resources, showing a sign of low mobility between generations. The results are in conjunction with findings by Pohan & Vitale (2016) which stated that parent's income plays a bigger role in predicting child's income. This could be explained as wealthy child being more likely to attain higher education hence earning more as adults, which indirectly explains why parental income contributes significantly to child's income.…”