SCHOOL REPETITION, DROPOUTS, AND THE RATES OF RETURN TO SCHOOLING: THE CASE OF INDONESIA
| Author | Jere R. Behrman,Anil B. Deolalikar |
| Published date | 01 November 1991 |
| DOI | http://doi.org/10.1111/j.1468-0084.1991.mp53004007.x |
| Date | 01 November 1991 |
OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 53, 4(1991)
0305-9049 $3.00
SCHOOL REPETITION, DROPOUTS, AND
THE RATES OF RETURN TO SCHOOLING:
THE CASE OF INDONESIA
Jere R. Behrman and Anil B. Deolalikar*
Most developing countries have expanded greatly investment in schooling in
the past two decades. There has been very considerable growth in enrolment
rates expressed as a proportion of the eligible population: for currently low-
income countries from 73 and 20 percent for primary and secondary school-
ing, respectively, in 1965 to 104 and 37 percent in 1987 and for
middle-income countries from 92 and 26 percent in 1965 to 104 and 54
percent in 1987.1 For Indonesia, the subject of the present study, comparable
percentages are from 72 and 12 percent in 1965 to 118 and 46 percent in
1986. The Indonesian increases, thus, are large in comparison with those of
other developing countries (also see Behrman, 1987, 1988).
A major argument for the expansion of schooling in the developing world
is that studies of the rate of return to schooling based on wage rates and
other labour market outcomes suggest high rates of return to investment in
schooling, particularly primary schooling. World Bank (1980), and Psacharo-
poulos (1985), for example, summarize existing evidence as implying average
social rates of return to primary schooling of about 24 percent and lower, but
still considerable, rates of return for secondary and higher education.
Available estimates for Indonesia are of a similar order of magnitude.2
To obtain such estimates, however, some assumptions must be made about
how much time students spend in school in order to attain the grade level or
to complete the schooling category that they report. If grade repetition and
tThe authors are grateful to Martin Godfrey for helpful discussions on this subject and to
Stephen Nickell and other members of the editorial board for helpful suggestions on an earlier
draft. The authors alone are responsible for all interpretations given in this paper.
'Based on data in World Bank (1990). Percentages over 100 percent reflect schooling
enrolments larger than the population normally relevant for a given schooling level (e.g. ages
6-11 for prmarv schooling). Such percentages are not uncommon for developing countries
with rapidly expanding primary school systems that are attended by numerous students over
the normal primary school age.
2 Payaman (1981) and Pscharopoulos (1982) estimate private rates of return to be in the
15-26 percent range for various schooling levels. Psacharopoulos (1982), Clark (1983), LEES
(1986) and McMahon and Boediono (1988) estimate social (adjusting for public sector costs,
though not externalities) rates of return to be in the 9 to 25 percent range for various schooling
levels.
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