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Declining rates of return to education: evidence for Indonesia

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  • Losina Purnastuti
  • Paul W. Miller
  • Ruhul Salim

Abstract

In 1977, American labour economist Richard Freeman documented a fall in the return to education in the US, and attributed it to the expansion of the country's education sector. This article shows, similarly, that the returns to education in Indonesia generally declined between 1993 and 2007--08, following the large-scale expansion of the sector. The changes, however, were reasonably modest, and sometimes differed between males and females. This suggests that both recent growth in the education sector (which by itself could depress the return to education) and uneven growth across the Indonesian economy (which could differentially increase demand for graduates at various levels of education) have played a role in determining the pattern of change over time in the profitability of education in Indonesia.

Suggested Citation

  • Losina Purnastuti & Paul W. Miller & Ruhul Salim, 2013. "Declining rates of return to education: evidence for Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 49(2), pages 213-236, August.
    • Handle: RePEc:taf:bindes:v:49:y:2013:i:2:p:213-236
    DOI: 10.1080/00074918.2013.809842
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    References listed on IDEAS

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    1. Margherita Comola & Luiz de Mello, 2010. "Educational attainment and selection into the labour market: The determinants of employment and earnings in Indonesia," Working Papers halshs-00564835, HAL.
    2. Patrinos, Harry Anthony & Ridao-Cano, Cris & Sakellariou, Chris, 2006. "Estimating the returns to education : accounting for heterogeneity in ability," Policy Research Working Paper Series 4040, The World Bank.
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    Cited by:

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    2. Riska Dwi Wulandari & Susilo & Dias Satria, 2018. "Income Inequality between Formal-Informal Employees Based on Education Group," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 64, pages 25-42, Juni.
    3. Virgi A. Sari, 2019. "Educational Assistance and Education Quality in Indonesia: The Role of Decentralization," Population and Development Review, The Population Council, Inc., vol. 45(S1), pages 123-154, December.
    4. Adhitya, Dhian & Samudro, Bhimo Rizky, 2019. "The Role of Cognitive and Non-Cognitive Skills on Labour Market Outcomes in Indonesia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 53(1), pages 3-16.
    5. Ramstetter, Eric D. & Narjoko, Dionisius, 2013. "Wage Differentials between Foreign Multinationals and Local Plants and Worker Education in Indonesian Manufacturing," AGI Working Paper Series 2013-23, Asian Growth Research Institute.
    6. Kadir, Kadir & Weni Lidya, Sukma, 2019. "Returns to Education and Wages Distribution in Indonesia: A Comparison across Gender Groups," MPRA Paper 94929, University Library of Munich, Germany, revised 25 Apr 2019.
    7. Virgi Agita Sari & Ralitza Dimova, 2024. "The Decline and Levelling Off of Earnings Inequality: Boon or Bane for a Growing Economy?," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 36(6), pages 1448-1470, December.
    8. Elfindri & Edi Ariyanto & Sri Maryati & Delfia T. Sari, 2022. "Why the Rate of Return of Religious School (Madrasah) is Too Low: The Case in Indonesia," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 68, pages 51-61, Juni.
    9. Christoph Strupat, 2017. "Do Targeted Reproductive Health Services Matter? – The Impact of a Midwife Program in Indonesia," Health Economics, John Wiley & Sons, Ltd., vol. 26(12), pages 1667-1681, December.
    10. repec:ilo:ilowps:487581 is not listed on IDEAS
    11. Wenxiao Wang & Christopher Findlay & Shandre Thangavelu, 2021. "Trade, technology, and the labour market: impacts on wage inequality within countries," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 35(1), pages 19-35, May.
    12. Sparreboom, Theo. & Staneva, Anita., 2015. "Structural change, employment and education in Mozambique," ILO Working Papers 994875813402676, International Labour Organization.
    13. Ian Coxhead & Rashesh Shrestha, 2016. "Could a Resource Export Boom Reduce Workers’ Earnings? The Labour-Market Channel in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 52(2), pages 185-208, May.
    14. Virgi Sari, 2018. "Educational assistance and education quality in Indonesia: The role of decentralization," WIDER Working Paper Series 037, World Institute for Development Economic Research (UNU-WIDER).
    15. Yubilianto, 2020. "Return to education and financial value of investment in higher education in Indonesia," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 9(1), pages 1-28, December.
    16. Lamazi & Syamsurijal A.K & NurlinaTarmizi & Tatang A.M Sariman, 2016. "Analysis Factors That Influence Wage Disparity Between Female Workers In Urban And Rural Areas In South Sumatera," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 4(3), pages 54-63.
    17. Strupat, Christoph, 2014. "Does Timing of Health and Family Planning Services Matter? Age at First Birth and Educational Attainment in Indonesia," Ruhr Economic Papers 503, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    18. Ramstetter, Eric D., 2014. "Exporting, Education, and Wage Differentials between Foreign Multinationals and Local Plants in Indonesian and Malaysian Manufacturing," AGI Working Paper Series 2014-03, Asian Growth Research Institute.
    19. repec:zbw:rwirep:0503 is not listed on IDEAS
    20. Christoph Strupat, 2014. "Does Timing of Health and Family Planning Services Matter? Age at First Birth and Educational Attainment in Indonesia," Ruhr Economic Papers 0503, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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