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

Author

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

Abstract

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.

Suggested Citation

  • Arze del Granado, Javier & Fengler, Wolfgang & Ragatz, Andrew & Yavuz, Elif, 2007. "Investing in Indonesia’s Education: Allocation, Equity, and Efficiency of Public Expenditures," MPRA Paper 4372, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:4372
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    References listed on IDEAS

    as
    1. World Bank, 2006. "Making the New Indonesia Work for the Poor," World Bank Publications - Reports 8172, The World Bank Group.
    2. World Bank, 2007. "Spending for Development : Making the Most of Indonesia's New Opportunities, Indonesia Public Expenditure Review 2007," World Bank Publications - Reports 7816, The World Bank Group.
    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.
    4. F. Javier Arze del Granado & Jorge Martinez-Vazquez & Robert McNab, 2005. "Fiscal Decentralization and The Functional Composition of Public Expenditures (2005)," 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.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Mohamad Fahmi & Ben Satriatna, 2013. "Development in Education Sector: Are the Poor Catching Up?," Working Papers in Economics and Development Studies (WoPEDS) 201315, Department of Economics, Padjadjaran University, revised Jul 2013.
    2. Ferry Prasetyia, 2019. "The role of local government policy on secondary school enrolment decision in Indonesia," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 9(2), pages 139-172, June.
    3. Tobing, Elwin, 2011. "Taxation, human capital formation, and long-run growth with private investment in education," Journal of Asian Economics, Elsevier, vol. 22(1), pages 48-60, February.
    4. Olivier BARGAIN & Maria C. LO BUE & Flaviana PALMISANO, 2022. "Dynastic Measures of Intergenerational Mobility," Bordeaux Economics Working Papers 2022-21, Bordeaux School of Economics (BSE).
    5. Kazushi Takahashi, 2011. "Determinants of Indonesian rural secondary school enrolment: gender, neighbourhood and school characteristics," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 47(3), pages 395-413, December.
    6. Indunil De Silva & Sudarno Sumarto, 2015. "How do Educational Transfers Affect Child Labour Supply and Expenditures? Evidence from Indonesia of Impact and Flypaper Effects," Oxford Development Studies, Taylor & Francis Journals, vol. 43(4), pages 483-507, December.
    7. Leer, Jane, 2016. "After the Big Bang: Estimating the effects of decentralization on educational outcomes in Indonesia through a difference-in-differences analysis," International Journal of Educational Development, Elsevier, vol. 49(C), pages 80-90.
    8. Daniel Suryadarma & Sudarno Sumarto, 2011. "Survey of recent developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 47(2), pages 155-181.
    9. Thia Jasmina, 2016. "Public Spending and Learning Outcomes of Basic Education at the District Level in Indonesia," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 62, pages 180-190, December.
    10. Sumarto, Sudarno & de Silva, Indunil, 2013. "Education Transfers, expenditures and child labour supply in Indonesia: An evaluationof impacts and flypaper effects," MPRA Paper 57132, University Library of Munich, Germany.

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    More about this item

    Keywords

    education Indonesia; expenditures education Indonesia; Indonesia's education; quality education; efficiency of education expenditures; equity of education expenditures; rates of return; teacher wages indonesia; education 20% rule Indonesia;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

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