The medium run effects of education expansion : evidence from a large school construction program in Indonesia

70 Pages·2001·2.4 MB·English

by  Duflo, Esther, 1972-

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1
Dewey
Massachusetts Institute ot Technology
Department of Economics
Working Paper Series
The Medium Run Effects of Education Expansion: Evidence
from a Large School Construction
Program Indonesia
in
MIT
Esther Duflo,
Working Paper 01 -46
November 2001
Roonn E52-251
50 iVJemoriai Drive
MA
Cannbriclge, 02142
This paper can be downloaded without charge from the
Social Science Research Network Paper Collection at
http://papers.ssrnCom/abstract=29431

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Massachusetts Institute of Technology
Department of Economics
Working Paper Series
The Medium Run Effects of Education Expansion: Evidence
from a Large School Construction
Program Indonesia
in
MIT
Esther Duflo,
Working Paper 01 -46
November 2001
Room
E52-251
50 Memorial Drive
MA
Cambridge, 02142
This paper can be downloaded without charge from the
Social Science Research Network Paper Collection at
http://papers.ssrn.com/paper.taf?abstractjd=294311
MASSACHUSEHS INSTITUTE
OFTECHNOLOGY
MAR 7 2002
LIBRARIES
The Medium Run Effects of Educational Expansion:
Evidence from a Large School Construction Program in Indonesia
Esther Duflo *
November 2001
Abstract
This paperstudiesthemedium runconsequencesofanincreasein therateofaccumulation
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.
*I thank participants at the conference "New Research on Education in Developing Countries" at the Center
for Researchon Economic Development and Policy ReformofStanford University forcomments, and particular to
Hanan Jacoby for his discussion of the paper. I also thank two referees and the editor for very useful comments.
I thank Lucia Breierova for excellent research assistance, Daron Acemoglu, Joshua Angrist, Abhijit Banerjee,
Robert Barro, Ricardo Caballero, David Card, Michael Kremer, Emmanuel Saez, and Jaume Ventura for very
helpful discussions, and Guido Lorenzoni for his insights about transitional dynamics.