Impacts of Education and Environmental Sustainability on Rural Income Inequality in Indonesia

¹ Faculty of Economics, Universitas Negeri Semarang, Semarang, Indonesia
² Undergraduate Program of Development Economics, Universitas Negeri Semarang, Semarang, Indonesia

^* Corresponding author: andryan@mail.unnes.ac.id

Abstract

Income inequality may hinder rural development and education is seen an important tool in rural development processes as well as it become an effective way in reducing rural income inequality. Human capital theory suggests that higher education can increase income, and it will decrease income inequality. The first objective of this study is to examine the effect of education on rural income inequality in Indonesia. This study also examines the relationship between environmental deterioration and rural income inequality. Studies about the impact of higher levels of inequality on environmental deterioration are not new, but the opposite studies are rare. Therefore, the second objective of this study is to examine the effect of environmental deterioration on rural income inequality in Indonesia. This study applies panel data from 32 provinces in Indonesia during 2012 to 2018. The results show that higher education resulting in lower rural income inequality in Indonesia. Furthermore, the finding also shows that the efforts to reduce environmental deterioration resulting in lower rural income inequality in Indonesia. This study suggests that it is vital to improve education level and to apply nature-friendly approaches to reduce income gaps in rural areas so the rural development goals can be achieved.