Abstract

In 1973, the Indonesian government began one of the largest school construction programs ever. We use 2016 nationally representative data to examine the long-term and intergenerational effects of additional schooling as a child. We use a difference-in-differences identification strategy exploiting variation across birth cohorts and regions in the number of schools built. Men and women exposed to the program attain more education, although women’s effects are concentrated in primary school. As adults, men exposed to the program are more likely to be formal workers, work outside agriculture, and migrate. Households with parents exposed to the program have improved living standards and pay more government taxes. Education benefits are transmitted to the next generation. Increased parental education has larger impacts for daughters, particularly if mothers are exposed to school construction. Intergenerational results are driven by changes in the marriage partner’s characteristics, with spouses having more education and improved labor market outcomes.

Highlights

  • The questions of which adult outcomes are affected by increases in educational attainment and whether these effects persists into the generation are of great policy importance and broad research interest

  • While much of the government spending is motivated by the belief that increases in education will translate to higher economic development and growth, the causal effect of schooling on economic growth is not uncontested

  • We study the causal impact of one of the largest primary school construction programs ever completed on a wide range of long-term and intergenerational outcomes, including those related to education, employment, migration, living standards, taxes, marriage, health, housing and assets

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Summary

Introduction

The questions of which adult outcomes are affected by increases in educational attainment and whether these effects persists into the generation are of great policy importance and broad research interest. We study the causal impact of one of the largest primary school construction programs ever completed on a wide range of long-term and intergenerational outcomes, including those related to education, employment, migration, living standards, taxes, marriage, health, housing and assets. Accounting for improved living standards of the Indonesian population reveals high internal rates of return ranging from 13-21 percent and benefits surpassing costs within 17-30 years after the schools were built. These results provide strong support for the cost-effectiveness of supply-side interventions..

Institutional Context
Difference-in-differences
Strategies to address the large number of outcomes
Results
Long-run labor market impacts
Long-term impacts on living standards, taxes, housing, and assets
Long-run impacts on nutrition and health
Heterogeneity of second generation results by gender and grade
Conclusion
Online Appendix Figures and Tables
Data Appendix
Cost-benefit Calculations Appendix

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