SMERU Publication

Working Paper
Topic: Education, Poverty Analysis

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The Contrasting Role of Ability and Poverty on Education Attainment: Evidence from Indonesia

Daniel Suryadarma
Asep Suryahadi

Editor:
Budhi Adrianto

ABSTRACT

This study measures the relative role of poverty and scholastic ability on education attainment in developing countries, where a substantial portion of the population still live in poverty and poor people are markedly credit constrained. Different from most studies in developing countries, this paper uses a multiple-wave and long-spanning panel dataset that follows a cohort of children beginning from primary school until they are well over schooling age. We find that poverty has a statistically-significant and negative effect on junior high attainment, while it has a negligible effect on senior high completion. In contrast, scholastic ability plays no role in ensuring junior high completion but is crucial in increasing a child’s chance to graduate from senior high school. In addition, we find that high- and low-ability poor children have a similarly low chance of finishing junior high school. Based on our findings, we formulate several policy recommendations to increase education attainment.

Keywords: poverty, scholastic ability, education, Indonesia
JEL Classifications: I21, 015

TABLE OF CONTENTS

ABSTRACT
TABLE OF CONTENTS
LIST OF FIGURES
LIST OF TABLES
I. INTRODUCTION
II. INDONESIA: COUNTRY OVERVIEW

2.1 Poverty
2.2 Education Attainment

III. THE INDONESIAN PRIMARY AND SECONDARY EDUCATION SYSTEM
IV. CONCEPTUAL FRAMEWORK
V. DATA
VI. POVERTY, ABILITY, AND EDUCATION ATTAINMENT

6.1 Constructing Poverty and Ability Variables
6.2 Poverty and Education Attainment
6.3 Scholastic Ability and Education Attainment
6.4 The Interactions between Poverty and Ability

VII. THE MODEL AND ESTIMATION RESULTS

7.1 Estimation Strategy
7.2 The Effects of Poverty and Ability
7.3 The Relative Importance of Poverty and Ability
7.4 The Effect of Chronic Poverty

VIII CONCLUSIONS AND RECOMMENDATIONS
LIST OF REFERENCES
APPENDICES