Rural road infrastructure in Indonesia has increased significantly, especially during the last decade. This study presents an overview of how rural road quality and accessibility affected village economic transformation. It is the first empirical study in Indonesia addressing rural transformation. Village-level microdata, referring to the smallest administrative official, were utilized. Using a Random-Effects Panel Logit model, this study discovered that improving the type of road surface and accessibility for four-wheeled vehicles significantly increased the probability of village economic transformation. Different types of road infrastructure improvement affected the rural economic transformation both within and outside Java-Bali. Paved or concrete roads in Java-Bali had a higher marginal effect than on other islands, thereby increasing the likelihood of rural economic transformation. However, the road accessibility for four-wheeled vehicles in Java-Bali did not significantly affect the probability of rural economic transformation. Nevertheless, for villages on other islands, it did. Furthermore, the transformation significantly influenced other infrastructures, such as electricity coverage, market presence, information and communication technology (ICT), and flatland topography. Moreover, the road access to villages and the availability of water or irrigation significantly affected the probability of surviving in the agricultural sector. Following these findings, policymakers should prioritize villages’ infrastructure by considering different types of infrastructure provision across villages, referring to different infrastructure needs for Java-Bali and other islands.

Rural Development is a major concern of the Indonesian government and has grown rapidly in the last decade. However, the pattern of development and its correlation to poverty remains a question mark. Using the Difference in Difference estimation model we analyzed whether the economic transformation in the rural area that occurred in the period 2014 to 2018 correlated with a decline in rural poverty. This study utilized secondary data from the micro dataset referring to the smallest administrative level named Village Potential from the Central Bureau of Statistics in Indonesia. Disaggregated by the transformed sectors, this study shows that the strongest correlation to the decline in the number of rural poor occurs when agricultural dominant-based villages have been complemented by adequate or have transformed as well to the service sector and other sectors. While the transformation to the trade sector shows the right direction of the correlation that reflects the decline in the number of poor people, the effect is still not significant. Atypical result in the transportation sector and industrial sector has not reduced poverty.