IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/8710.html
   My bibliography  Save this paper

The Medium Run Effects of Educational Expansion: Evidence from a Large School Construction Program in Indonesia

Author

Listed:
  • Esther Duflo

Abstract

This paper studies the medium run consequences of an increase in the rate of accumulation of human capital in a developing country. From 1974 to 1978, the Indonesian government built over 61,000 primary schools. The school construction program led to an increase in education among individuals who were young enough to attend primary school after 1974, but not among the older cohorts. 2SLS estimates suggest that an increase of 10 percentage points in the proportion of primary school graduates in the labor force reduced the wages of the older cohorts by 3.8% to 10% and increased their formal labor force participation by 4% to 7%. I propose a two-sector model as a framework to interpret these findings. The results suggest that physical capital did not adjust to the faster increase in human capital.

Suggested Citation

  • Esther Duflo, 2002. "The Medium Run Effects of Educational Expansion: Evidence from a Large School Construction Program in Indonesia," NBER Working Papers 8710, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8710
    Note: CH
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w8710.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    2. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 705-746.
    3. Heckman, James J & Lochner, Lance & Taber, Christopher, 1998. "General-Equilibrium Treatment Effects: A Study of Tuition Policy," American Economic Review, American Economic Association, vol. 88(2), pages 381-386, May.
    4. Esther Duflo, 2001. "Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment," American Economic Review, American Economic Association, vol. 91(4), pages 795-813, September.
    5. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    6. Ricardo J. Caballero & Mohamad L. Hammour, 1998. "The Macroeconomics of Specificity," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 724-767, August.
    7. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
    8. Alan B. Krueger & Mikael Lindahl, 2000. "Education for Growth: Why and For Whom?," Working Papers 808, Princeton University, Department of Economics, Industrial Relations Section..
    9. Philippe Aghion & Patrick Bolton, 1997. "A Theory of Trickle-Down Growth and Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(2), pages 151-172.
    10. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 35-52.
    11. Welch, Finis, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 65-97, October.
    12. Miguel, Edward A. & Gertler, Paul & Levine, David I., 2003. "Did Industrialization Destroy Social Capital in Indonesia?," Department of Economics, Working Paper Series qt9kt2m860, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    13. Foster, Andrew D & Rosenzweig, Mark R, 1996. "Technical Change and Human-Capital Returns and Investments: Evidence from the Green Revolution," American Economic Review, American Economic Association, vol. 86(4), pages 931-953, September.
    14. Atkinson, A.B. & Brandolini, A., 2000. "Promise and Pitfalls in the Use of 'Secondary' Data -Sets: Income Inequality in OECD Countries," Papers 379, Banca Italia - Servizio di Studi.
    15. Mark Bils & Peter J. Klenow, 1998. "Does Schooling Cause Growth or the Other Way Around?," NBER Working Papers 6393, National Bureau of Economic Research, Inc.
    16. Ricardo J. Caballero & Mohamad L. Hammour, 2000. "Creative Destruction and Development: Institutions, Crises, and Restructuring," NBER Working Papers 7849, National Bureau of Economic Research, Inc.
    17. Robert M. Solow, 2000. "Toward a Macroeconomics of the Medium Run," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 151-158, Winter.
    18. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
    19. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    20. Daron Acemoglu & Joshua Angrist, 1999. "How Large are the Social Returns to Education? Evidence from Compulsory Schooling Laws," NBER Working Papers 7444, National Bureau of Economic Research, Inc.
    21. Frankenberg, E. & Thomas, D. & Beegle, K., 1999. "The Real Costs of Indonesia's Economic Crisis: Preliminary Findings from the Indonesia Family Life Surveys," Papers 99-04, RAND - Labor and Population Program.
    22. Daron Acemoglu, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(3), pages 779-804.
    23. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    24. Mikael Lindahl & Alan B. Krueger, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
    25. Kremer, Michael & Thomson, James, 1998. "Why Isn't Convergence Instantaneous? Young Workers, Old Workers, and Gradual Adjustment," Journal of Economic Growth, Springer, vol. 3(1), pages 5-28, March.
    26. Oliver J. Blanchard, 1997. "The Medium Run," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 89-158.
    27. Banerjee, Abhijit V & Duflo, Esther, 2003. "Inequality and Growth: What Can the Data Say?," Journal of Economic Growth, Springer, vol. 8(3), pages 267-299, September.
    28. Glewwe, Paul & Jacoby, Hanan G., 2004. "Economic growth and the demand for education: is there a wealth effect?," Journal of Development Economics, Elsevier, vol. 74(1), pages 33-51, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Asplund, Rita, 2004. "A Macroeconomic Perspective on Education and Inequality," Discussion Papers 906, The Research Institute of the Finnish Economy.
    2. Suri, Tavneet & Boozer, Michael A. & Ranis, Gustav & Stewart, Frances, 2011. "Paths to Success: The Relationship Between Human Development and Economic Growth," World Development, Elsevier, vol. 39(4), pages 506-522, April.
    3. Adrien Montalbo, 2019. "Education and economic development. The influence of primary schooling on municipalities in nineteenth-century France," PSE Working Papers halshs-02286126, HAL.
    4. Adrien Montalbo, 2019. "Education and economic development. The influence of primary schooling on municipalities in nineteenth-century France," Working Papers halshs-02286126, HAL.
    5. Bourguignon, Francois, 2005. "The Effect of Economic Growth on Social Structures," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 27, pages 1701-1747, Elsevier.
    6. Adrien Montalbo, 2020. "Education supply and economic growth in nineteenth-century France," Working Papers halshs-02482643, HAL.
    7. Middendorf Torge, 2006. "Human Capital and Economic Growth in OECD Countries," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 226(6), pages 670-686, December.
    8. Angel de la Fuente & Antonio Ciccone, 2003. "Human capital in a global and knowledge-based economy," UFAE and IAE Working Papers 562.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    9. Coen Teulings & Thijs van Rens, 2008. "Education, Growth, and Income Inequality," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 89-104, February.
    10. Antonio Ciccone & Giovanni Peri, 2006. "Identifying Human-Capital Externalities: Theory with Applications," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(2), pages 381-412.
    11. Mark Rogers, 2003. "A Survey of Economic Growth," The Economic Record, The Economic Society of Australia, vol. 79(244), pages 112-135, March.
    12. Adrien Montalbo, 2022. "Primary education and economic growth in nineteenth-century France," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 16(2), pages 277-332, May.
    13. Amparo Castelló-Climent & Rafael Doménech, 2012. "Human Capital and Income Inequality: Some Facts and Some Puzzles," Working Papers 1201, International Economics Institute, University of Valencia.
    14. Antonio Ciccone & Giovanni Peri, 2002. "Indentifying human capital externalities: Theory with an application to US cities," Economics Working Papers 611, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2005.
    15. Huw Lloyd-Ellis & Joanne Roberts, 2000. "Twin Engines of Growth," Cahiers de recherche CREFE / CREFE Working Papers 118, CREFE, Université du Québec à Montréal.
    16. Adrien Montalbo, 2020. "Education supply and economic growth in nineteenth-century France," PSE Working Papers halshs-02482643, HAL.
    17. Robert Dur & Coen Teulings, 2003. "Are Education Subsides an Efficient Redistributive Device?," CEE Discussion Papers 0030, Centre for the Economics of Education, LSE.
    18. Gustavo A. Marrero & Juan Gabriel Rodríguez, 2019. "Inequality and growth: The cholesterol hypothesis," Working Papers 501, ECINEQ, Society for the Study of Economic Inequality.
    19. Oded, Galor, 2011. "Inequality, Human Capital Formation, and the Process of Development," Handbook of the Economics of Education, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 4, chapter 0, pages 441-493, Elsevier.
    20. Petra Sauer & Martin Zagler, 2014. "(In)equality in Education and Economic Development," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(S2), pages 353-379, November.

    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:8710. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.