Average and marginal returns to upper secondary schooling in Indonesia

 WPS5878 Policy Research Working Paper 5878 Average and Marginal Returns to Upper Secondary Schooling in Indonesia Pedro Carneiro Michael Lokshin Cristobal Ridao-Cano Nithin Umapathi The World Bank Development Research Group & East Asia Pacific Region Social Protection Unit November 2011 Policy Research Working Paper 5878 Abstract This paper estimates average and marginal returns to per year of schooling for those very likely to enroll in schooling in Indonesia using a non-parametric selection upper secondary schooling, or as low as −10 percent for model estimated by local instrumental variables, and those very unlikely to do so. Returns to the marginal data from the Indonesia Family Life Survey. The analysis student (14 percent) are well below those for the average finds that the return to upper secondary schooling varies student attending upper secondary schooling (27 widely across individual: it can be as high as 50 percent percent). This paper is a product of the Development Research Group; and East Asia and Pacific Region, Social Protection Unit. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank. org. The author may be contacted at numapathi@worldbank.org. The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Produced by the Research Support Team  Average and Marginal Returns to Upper Secondary Schooling in Indonesia Pedro Carneiro† Michael Lokshin Cristobal Ridao-Cano Nithin Umapathi JEL Code: J31 Key words: Returns to Schooling, Marginal Return, Average Return, Marginal Treatment Effect __________________ † Pedro Carneiro is affiliated with University College London, IFS, Cemmap and Georgetown University, Nithin Umapathi is Economist with Social Protection sector in East Asia and Pacific, Michael Lokshin is Advisor, DECRG, and Cristobal Ridao-Cano is a Senior Economist with Education sector in ECA. Carneiro and Umapathi gratefully acknowledge the financial support from the Economic and Social Research Council for the ESRC Centre for Microdata Methods and Practice (grant reference RES-589-28- 0001) and the hospitality of the Development Economic Research Group of the World Bank. Carneiro gratefully acknowledges the support of ESRC-DFID (grant reference RES-167-25-0124), the European Research Council through ERC-2009-StG-240910-ROMETA and Orazio Attanasio‟s ERC-2009 Advanced Grant 249612 “Exiting Long Run Poverty: The Determinants of Asset Accumulation in Developing Countries