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Investing in Indonesia’s Education: Allocation, Equity, and Efficiency of Public Expenditures

  • Arze del Granado, Javier
  • Fengler, Wolfgang
  • Ragatz, Andrew
  • Yavuz, Elif

What is the current level and main characteristics of public education spending in Indonesia? Is education spending insufficient? Is education spending efficient and equitable? This study reports the first account of Indonesia’s aggregated (national and sub-national) spending on education, as well as the economic and sub-functional (by programs) composition of education expenditures. It presents estimations of the expected (average) level of education spending for a country with similar economic and social characteristics. It sheds light on efficiency and equity of education spending by presenting social rates of return by level of education, an assessment of the adequacy of current teacher earnings relative to other paid workers, the distribution of teachers across urban, rural, and remote regions, and the determinants of education enrollment. It concludes that the current challenges in Indonesia are not anymore defined by the need to increase spending on the supply side, but rather to improve the quality of education services, and to improve the efficiency of education expenditures by re-allocating teachers to undersupplied regions and re-adjusting the spending mix within and between education programs of future additional spending in the sector. The study finds that poverty and student-aged labor are also significant constraints to education enrollment, stressing the importance of policies aimed to address demand-side factors affecting education access in Indonesia.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4372.

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Date of creation: Jul 2007
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Handle: RePEc:pra:mprapa:4372
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  1. F. Javier Arze del Granado & Jorge Martinez-Vazquez & Robert McNab, 2005. "Fiscal Decentralization and The Functional Composition of Public Expenditures," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0501, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  2. World Bank, 2006. "Making the New Indonesia Work for the Poor," World Bank Other Operational Studies 8172, The World Bank.
  3. McMahon, Walter W. & Boediono, Walter W., 1992. "Universal basic education: An overall strategy of investment priorities for economic growth," Economics of Education Review, Elsevier, vol. 11(2), pages 137-151, June.
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