THE MEASUREMENT OF TERTIARY EDUCATION QUALITY IN INDONESIA THROUGH THE EDUCATION PRODUCTION FUNCTION MODEL AND POLICY RECOMMENDATIONS FOR QUALITY IMPROVEMENT

This study is designed to answer one main research question: How could tertiary education quality be redefined and measured through the education production function model in developing countries. The study will use Indonesia as the target country to carry out research activities. Quality of tertiary education has been one of the most frequently discussed topics in relevant fields in academia and human development. As enrollment continuously increases and education systems expand in many developing countries, quality becomes their biggest concern. The purpose of this dissertation is to provide stakeholders a different and more practical approach to reevaluate tertiary education quality through quantifiable variables and to measure quality through educational input, equity and equality, labor market relevance, and system assurance factors.\ud Human capital theory serves as the guiding theoretical framework for this dissertation. The education production function model is the foundation for quality redefinition. Within the four quantifiable variables, benefit incidence analysis is used to measure equity and equality, economic rate of return is used to measure labor market relevance of the tertiary education system, and returns to investment is used to evaluate how education outputs yield from inputs. The study is designed to have an umbrella structure, with tertiary education quality being at the top of the skeleton and educational input, equity and equality, labor market relevance, and system assurance being the four supporting pillars. \ud With the redefinition of tertiary education quality, four main research questions will be answered respectively. Educational input in Indonesia has been improving in the past decade; however, it is still behind compared to peer ASEAN countries and countries with similar economic profiles. Indonesia's tertiary education access inequality is mainly caused by socioeconomic differences. The labor market absorbs a majority of tertiary graduates and yields much higher returns at the tertiary level, and it has been responding very positively toward the continuously expanding graduating class. The quality assurance system suffers from short-staffing, low financial support, low capacity, and weak government support. At its current accrediting pace, Indonesia's tertiary education institutions will not be able to improve as fast as they are willing to.\u