This paper presents a case study of the microeconomy of a typical underdeveloped village in southwest China and the role of elementary education in the village economy. The paper begins with a brief review of relevant theories on the economics of education and the current social conditions and state of education in the village under study, and then tabulates and summarizes the income and living expenses of the villagers. The results of this analysis of income and expenses show an enormous gap, where a large proportion of the meager income earned by the villagers is "missing." Further analysis explained the "missing" money: first, it was largely invested in compulsory and higher education; and second, an unusually high proportion of the villagers' income was spent outside the village. These findings at least partially explain the impoverishment of the village under study (i.e., due to overinvestment in education, a skewed orientation toward external spending, and investment in education outside of the village). This structure of investment and spending siphons off the villagers' disposable income, smothers economic activity in the village, and ultimately exacerbates the impoverishment of the village under study. [This article was translated by Carissa Fletcher. ]