Working Paper 2016-397
Education is a strong predictor for economic performance. Therefore, educational inequality particularly in opportunity could make significant contribution to earning disparities. Following Ferreira and Gignoux (2014) parametric method, we construct aggregate indices of inequality of educational opportunities for fourteen Indonesian provinces in the years 1997, 2000 and 2007. Our particular and original contribution is to define individual indices of the power of circumstances which measure the strength of the influence that the accumulation of factors outside individual responsibility has in the short and in the long run on individual educational achievements and on earnings. We found that-along the period considered- there has been a declining trend in inequality of educational opportunities but not in all the provinces. Our findings also suggest that parental educational background is the most significant factor for school survival and that the effect that circumstances exert on future individual educational achievements and on early earnings perspectives tend to persist over time, but only to a very small extent. Moreover, our causal model which relates educational budget policy to equality of opportunity shows a negative impact of educational budget for the youngest cohorts, questioning therefore the effectiveness of the allocation of resources to primary and intermediate schools.
Authors: Rajius Idzalika, Maria C. Lo Bue.