Essays on Economics of Education

Abstract

[eng] This dissertation focuses on the determinants and the effects of human capital formation in Indonesia and contribute to the extensive literature on the economics of education. Since the seminal works by Mincer (1958), Goode (1959), Schultz (1961), and Becker (1975), a large amount of research has been conducted within this field, highlighting how educational investment boosts job performance and economic productivity. Such advancements are attributed to the acquisition of knowledge, skills, and personal traits through education, as discussed by Nelson et al. (1966) and further developed by Lucas (1988). Human capabilities, when combined with physical capital in the production function, play a crucial role in economic growth, as demonstrated by the empirical research of Barro (1991), Benhabib and Spiegel (1994), Barro and Sala-i-Martin (1995), and Griliches (1996). Within the context of globalization, the quantity and quality of human capital play a growing role in determining the competitive advantage of emerging countries (Awan et al., 2011; Cremin and Nakabugo, 2012; Montenegro and Patrinos, 2014). Indeed, the economic rise of East Asian economies was clearly driven by their strategic investments in human capital building, which led to significant progress in economic development, and an important reduction in poverty and income inequality (World Bank, 1993). At the individual level, the benefits of investment in education can be framed in monetary and non-monetary terms. From the financial perspective, the primary return to human capital investment is in the form of higher lifetime earnings, which has been largely studied (Angrist and Krueger, 1991; Card, 1999; Blundell et al., 2004; Cascio and Lewis, 2006; Oreopoulos, 2006a; Aydemir and Kirdar, 2017; Hampf, 2019). Psacharopoulos and Patrinos (2018) conducted a comprehensive comparison among countries, highlighting the latest trends and patterns in returns to schooling based on a database of 139 countries for the 1950–2014 period. Their analysis reveals universally positive returns to schooling, though the magnitude varies by country classification and region.