Essays on education and labor market outcomes in Indonesia

Education and labor market outcomes are closely interlinked; the extent to which to they are interdependent in a developing country context, like Indonesia, is the subject of this dissertation. I first query the long-run effects of education on labor market and other related outcomes and on the intergenerational transmission of education. In 1973, Indonesia began one of the largest school construction programs ever. Exploiting variation across birth cohorts and districts in the number of schools built suggests education benefits for men and women persist 43 years after the program. Exposed men are more likely to be formal workers, work outside agriculture, and migrate. Women are more likely to migrate and have fewer children. Their households have improved living standards and pay more government taxes. Education benefits are transmitted to their children, particularly from mothers to daughters. Intergenerational results are driven by improved marriage partner’s characteristics, including more education and secure employment. Second, I query if the low female labor force participation in Indonesia can potentially be mitigated by the availability of preschools, where preschools represent one form of childcare services. I exploit spatial and temporal variations in the access to public preschools and age-eligibility to implement a difference-in-difference-in-differences strategy and to infer the causal effect of public preschools on maternal employment. Accounting for mothers’ preferences for work, childrearing, and childbearing constant, I find that an additional public preschool per 1,000 children raises the employment probability of mothers of age-eligible children by 7.4 percentage points, a 13.8 percent improvement from the baseline mean. Mothers are absorbed in informal sector occupations that do not require full-time commitments. Third, I query how labor market regulations, such as minimum wage, can affect the incentive to invest in human capital. Between 1994 and 2009, Indonesia’s nominal minimum wages increased more than nine-fold. Previous empirical studies suggest that minimum wage hikes in Indonesia led to increases in wages and no net job losses. Could increasing minimum wages also increase the opportunity costs of schooling and induce a reduction in school enrollment? I leverage annual variations in minimum wage laws across provinces in Indonesia over time in a difference-in-differences framework. Using pooled annual Labor Force Surveys from 1994 to 2009, I find that minimum wages do not have statistically significant effects on school enrollment and work participation of youths. Estimates are precisely estimated; thus, I can rule out enrollment elasticity smaller than -0.0073 and larger than 0.027.U of I OnlyAuthor requested U of Illinois access only (OA after 2yrs) in Vireo ETD syste