David NewhouseDaan PattinasaranyDaniel Suryadarma

Outline of presentation1. Motivation (vocational education expansion) 2. Data and estimation strategy 3. Effects of high school type

Entire sample Cohort vs. age effects

Vocational education in IndonesiaShare of vocational high schools (SMK) is shrinking 

Planned expansion

Plan to expand enrollment in vocational high schoolsIncrease ratio of SMK:SMA students to 50:50 by 2010Up to 70:30 by 2015, moving 4.1 million students into SMKMotivated by desire to reduce unemployment. 

Weak empirical support

Existing researchNo differences between SMK and SMA outcomes in:

South Korea (KRIVET, 2008)Singapore (Sakellariou, 2003)Romania (Malamud & Pop‐Eleches, 2008)

Evidence on gender differences is mixed Males: SMK earn higher in Egypt but lower in Singapore. (El‐hamidi 2006)Females: SMK earn higher in Singapore but lower in Egypt.

Past research in Indonesia“VTE results in neither advantage nor disadvantage with respect to earnings or employment” (Chen, 2009). But…

Wide confidence intervals: OLS: 0 to 60% of mean earnings IV: ‐50 to 150% of mean earnings 

Sample restricted to adults under 2530 percent of sample still in college. Selection correction excludes head education, test scores, prior household income from earnings regression (?) 

Few control variables (gender, rural, age) 

Our contributionsSeparate men and women Distinguish between public and private schoolsMany cohorts (all born from 1940‐1980) Rich set of predetermined controls

Parental education (even if non‐coresident)District of Jr. High school dummies 

Four main LM indicators Participation, unemployment, formal work, wage 

OLS (for now), IV (hopefully coming later) 

Main messages: Public VTE No significant wage effect. Confidence intervals: ‐10 to 13 percent for men‐7 to 22 percent for women 

For women, increases chance of formal job For young men born 1973‐1980, worrisome recent fall in returns. ‐50 to 7 percent in 2000‐2 to ‐80 percent in 2007

Main results: Other types Public school premium

20 percent wage premium for menPrivate general education underperforming

Outcomes equal or worse than private VTE, despite observably more privileged students 

Why do men attend private general schools? Market for information functions poorly? Non‐academic factors relatively important in determining preferences?

Data 4 rounds of Indonesian Family Life Survey

1993, 1997, 2000, 2007 7,300 households in 1993, 12,600 by 2007 13 provinces representing 83% of Indonesia in 1993 Retrospective data on school attendance 

Type of schools for all levelsIncluding test scores for those born 1983 or later. 

Limited to high school students

Data constructionMen Obs Women Obs

Eligible high school grads  2989 6972 2513 6035Reported school information 2790 6619 2360 5940

In labor force 2660 6001 1786 3507Employed 2495 5485 1546 2921

Reported earnings 2382 5109 1451 2718

Reported school information 2790 6619 2360 5940Old cohort (born 1940‐1963) 927 2608 585 1760Middle cohort (1964‐1972) 950 2066 838 1957Recent cohort (1973‐1980) 888 1494 947 1686

Of which reported test score 754 1276 777 1379

Choice of school type

iddpdiPiizi PPZT εβββ +++=• Tid = School Type 

Public general, public VTE, private general, private VTE

• Zi = Predetermined characteristicsCohort, sex, age 12 residence (city, town, village), adult height, public jr. high, worked in jr. high, worked in elem, failed grade in jr. high, failed grade in elem, province of junior high)

• Pi = Parental education (both parents)Elementary, jr. high, high school, univ dummies Vocational dummy 

• Pd = District parental education shares

Vocational school attract children of least educated parents

Men Women

Pub gen VTE

Prigen VTE

Pub gen VTE

Prigen VTE

Father elem 4.2 -1.4 4.0 -6.9* -6.1 -4.9 5.7 5.3Jr. high 6.0 -4.2 7.9 -9.8** -5.5 -8.9* 7.9 6.6High school 5.3 -7.1 14.0** -12.2*** -1.3 -8.8 11.0 -0.8University 18.5** -12.3*** 12.7* -19.0*** 6.1 -11.8** 7.5 -1.8

Mother elem 0.1 -4.4* 5.6* -1.3 6.6 6.9** -4.5 -9.0***Jr. high 2.5 -4.5 7.8* -5.9 12.9** -1.3 2.0 -13.6***

High school 5.2 -8.6* 1.9 1.5 10.1 5.0 -2.2 -12.9**University 18.8* -5.4 -4.4 -9.1 17.0* 7.6 -11.3 -13.3**

School type determinants: Young cohortFor youngest cohort, test scores are available.

Si = Score tertile  (on jr. high exit exam) 

idisdpdiPiizi SPPZT εββββ ++++=

Public schools attract high scorers• Public VTE attracts high scoring student•Private VTE attracts lowest‐scoring students 

Men Women

Pub gen VTE

Pri genVTE

Pub gen VTE

Pri genVTE

Test middle tercile 13.3*** 8.2** -2.6 -18.9*** 5.1 8.9** -2.6 -11.3***Test upper tercile 24.0*** 16.6*** -17.8*** -22.7*** 19.4*** 13.0*** -9.6** -22.7***

Observations 749 772Pseudo‐r2 0.201 0.219

Selection: Summary RankingsRanking Parental education Test scores

Top Private general Public general and VTE Second Public generalThird Public VTE  Private generalBottom Private VTE  Private VTE 

Estimating labor market outcomesidisttddiPiizit TDDPZY εβββββ +++++=

i = person, t = year, d = district

Ti = dummies for pub VTE, pri gen, pri VTE.Zi = Predetermined characteristicsPi = Parental education  Dd = District of jr. high dummies Dt = Year dummies Yi = Four outcomes: 

• Participation, Unemployment (conditional on participation) • Formal job, Log wage/profit (conditional on working)

Estimating labor market outcomesReweight using inverse propensity scores

Propensity scores taken from multinomial logit of school type Helps balance observables across school types

Protects against bias from linear functional form assumption  

Students in different types of school appear different based on observables. Loss of efficiency 

Important to separate by genderDifferences in both participation and vocational education majors  

Women tend to study business or tourism rather than technical orindustrial subjects.  

Public VTE: No discernible effect on LFP or Unemp

Men WomenLFP Unemp LFP Unemp

Public VTE 0.014* -0.010 0.028 -0.015

(0.007) (0.011) (0.029) (0.012)

Private 0.011 -0.005 -0.068** 0.019*

general (0.008) (0.008) (0.032) (0.011)

Private VTE  0.004 0.008 -0.030 0.001

(0.009) (0.013) (0.035) (0.013)

Pub gen prob 0.965 0.051 0.684 0.046r2 0.077 0.149 0.188 0.223Observations 6,158 5,963 5,387 3,478

High public school wage premium for men

Men WomenFormal Wage Formal Wage

Public VTE 0.032 0.011 0.058** 0.075

(0.023) (0.057) (0.028) (0.072)

Private -0.058** -0.172*** -0.080** -0.043

general (0.027) (0.060) (0.039) (0.073)

Private VTE 0.029 -0.192*** 0.003 -0.013

(0.024) (0.064) (0.037) (0.080)

Pub gen prob 0.743 0.748r2 0.188 0.223 0.245 0.313Observations 5,696 5,102 3,324 2,709

Public wage premium robustWage premium for median female VTE

But no jr. high district fixed effects in LAD estimates

Men WomenOLS LAD OLS LAD

Public VTE 0.011 0.028 0.075 0.118**

(0.057) (0.039) (0.072) (0.049)

Private -0.172*** -0.262*** -0.043 -0.203***

general (0.060) (0.043) (0.073) (0.070)

Private VTE -0.192*** -0.184*** -0.013 -0.076

(0.064) (0.040) (0.080) (0.066)

Observations 5,102 5,102 2,709 2,709

Age and cohort effectsInteract with years, separately by cohort

C = cohort Old: 1940‐1963Middle: 1963‐1972Recent: 1973‐1980

Interact type with all four years  (omit main effects) Graph estimated effect vs. mean age for each cohort and year  

idtiTdpdiPiizic DTPPZY εββββ ++++= *

Age and cohort effects: LFPMen Women

Age and cohort effects: UnempMen Women

Age and cohort effects: Formality

Men Women

Age and cohort effects: WagesMen Women

Partly robust to median regMen Women

SummarySelection

Rank on test score: Public, private general, private VTE  Rank by parent education: Private general, public general, Public VTE, private VTE 

OutcomesPub VTE boosts female formality For men, private school grads face 20 percent wage penalty.   

Suggests that test scores and peer effects are important determinants of future earnings for men

SummaryPrivate general graduates are underperforming 

Perform as poorly or worse than private VTE grads despite more educated parents. 

Male VTE penalty increasing among recent grads Industrial and technical VTE less relevant in an increasingly service‐oriented economy? 

Policy implicationsExpansion should proceed with caution, given recent fall in male graduates’ earnings 

If anything, more important to expand access to public schools than VTE specificallyRe‐examine industrial public VTE curriculum

Private VTE appears to be effective at preparing the weakest students 

Scope for vouchers? 

The puzzle of private general schools

Why is there a private school wage penalty for men but not women?

Are privately schooled low‐earnings women more likely to not work?  

Why do well‐educated parents send their children to private general schools? 

Poorly functioning market for information on quality of private general schools? Vocational curricula and private status are complements? 

Public VTE has become less popular

Men WomenPub gen VTE

Pri gen VTE

Pub gen VTE

Pri gen VTE

Middle cohort 4.5* ‐12.7*** 9.1*** ‐0.9 ‐0.5 ‐15.8*** 9.9*** 6.4**

Recent cohort ‐2.6 ‐13.1*** 3.8 11.9*** 2.2 ‐19.6*** 8.2*** 9.2***

Failed grade in jr. high ‐3.1 ‐2.5 5.8 ‐0.2 3.3 ‐13.8 2.3 8.2

Small town at age 12 1.3 0.2 ‐1.3 ‐0.2 4.3* ‐3.6* ‐2.3 1.6

City at age 12 4.3* ‐0.6 ‐3.0 ‐0.7 6.0** ‐1.4 1.6 ‐6.3***

Height ‐0.0 ‐0.2 0.4** ‐0.2 0.1 ‐0.1 0.3 ‐0.2

Base probability  12.8 30.8 18.4 38.0 50.6 19.8 17.7 11.9

Observations 2,716 2,303

Pseudo‐r2 0.089 0.108

“Formal job" is a meaningful outcome

Definition of formal job (Simplified national definition)

Defined for all workers (incl. 7% unpaid family)Formal jobs tend to have higher wages and benefits. 

Status Industry

Non‐Agriculture Agriculture

Family worker Informal Informal

Self‐employed alone Informal Informal

Self‐employed with temporary workers Formal Informal

Employers or Employees Formal Formal

Omitting scores has little effect(on young cohort of men, conditional on school type)Men, Young Cohort LFP UnemployedTest Scores included? Yes No Yes No

Public VTE 0.039 0.017 -0.038 -0.063(0.028) (0.028) (0.041) (0.045)

Private 0.021 0.012 -0.015 0.008general (0.025) (0.026) (0.033) (0.036)

Private VTE  -0.010 -0.005 -0.009 0.013(0.025) (0.028) (0.039) (0.043)

Observations 1,493 1,275 1,382 1,176

Omitting scores has little effect (on young cohort of men, conditional on school type)Men, Young Cohort Formal WageTest Scores included? Yes No Yes NoPublic VTE 0.021 0.033 -0.284*** -0.304***

(0.041) (0.046) (0.092) (0.094)

Private -0.001 -0.003 -0.063 -0.048general (0.038) (0.050) (0.086) (0.101)

Private VTE  0.061 0.058 -0.092 -0.046(0.041) (0.049) (0.085) (0.095)

Observations 1,180 1,001 974 819

Omitting scores has little effect (on young cohort of women, conditional on school type)Women, Young Cohort

LFP UnemployedTest Scores included? Yes No Yes No

Public VTE 0.022 0.024 -0.026 -0.025(0.048) (0.049) (0.034) (0.034)

Private -0.040 -0.017 0.024 0.042general (0.053) (0.055) (0.042) (0.045)

Private VTE  -0.016 0.010 0.033 0.059(0.051) (0.052) (0.035) (0.038)

Observations 1,376 1,376 872 872

Omitting scores has little effect (on young cohort of women, conditional on school type)Women, Young Cohort Formal WageTest Scores included? Yes No Yes NoPublic VTE 0.000 -0.004 -0.138 -0.126

(0.060) (0.059) (0.129) (0.132)

Private -0.129** -0.140** -0.129 -0.106general (0.060) (0.065) (0.136) (0.132)

Private VTE  -0.023 -0.036 -0.179 -0.181(0.052) (0.057) (0.119) (0.132)

Observations 761 761 580 580

Outcomes by test scoreMen Formal WageTest score Low High Low High

Public VTE 0.143 -0.001 -0.282 -0.371***(0.088) (0.055) (0.220) (0.143)

Private 0.024 0.048 -0.196 -0.321**general (0.086) (0.099) (0.151) (0.157)

Private VTE  0.146 0.101 -0.109 -0.489***(0.090) (0.081) (0.161) (0.174)

Observations 583 592 495 483

Outcomes by test scoreWomen Formal WageTest score Low High Low High

Public VTE 0.049 -0.025 0.376 -0.238(0.094) (0.100) (0.358) (0.196)

Private -0.093 -0.098 0.238 0.077general (0.093) (0.103) (0.281) (0.253)

Private VTE  -0.061 -0.021 0.281 -0.362*(0.106) (0.098) (0.188) (0.203)

Observations 403 403 292 351