Religion, Education, and Development

Over the course of development, state and non-state actors compete in the provision of public goods. We focus on the case of mass schooling and develop a new theoretical framework to understand how states take over education markets at the expense of alternative providers. We apply this model to a primary school expansion policy in 1970s Indonesia that aimed to homogenize and secularize education, at odds with a longstanding and largely informal Islamic school system. Using novel administrative data, we identify dynamic effects of the policy on education markets. Funded through growth in charitable giving and informal taxation, Islamic schools entered new markets, formalized, and introduced more religious curriculum to compete with the state. While primary enrollment shifted towards state schools, religious education increased overall as Islamic secondary schools absorbed increased demand for continued education. Exposed cohorts are not more attached to secular values and instead report greater religiosity. Our findings offer a new perspective on the consequences of education reforms and the persistence of dual institutional systems across numerous settings.