Essays On Education And Labor Market Outcomes In Indonesia

This dissertation examines the determinants of disparity in education and labor market outcomes. The first chapter, co-authored with Imelda, examines the impact of clean energy access on adult health and labor supply outcomes by exploiting a nationwide roll-out of clean cooking fuel program in Indonesia. This program led to a large-scale fuel switching, from kerosene, a dirty fuel, to liquid petroleum gas, a cleaner one. Using longitudinal survey data from the Indonesia Family Life Survey and exploiting the staggered structure of the program rollout, we find that access to clean cooking fuel led to a significant improvement in women’s health, particularly among those who spend most of their time indoors doing housework. We also find an increase in women’s work hours, suggesting that access to cleaner fuel can improve women’s health and plausibly their productivity, allowing them to supply more market labor. For men, we find an increase in the work hours and propensity to have an additional job, mainly in households where women accrued the largest health and labor benefits from the program. These results highlight the role of clean energy in reducing gender disparity in health and point to the existence of positive externalities from the improved health of women on other members of the household. The second paper studies the labor supply response of women to changes in expected alimony income. Using an alimony law change in the US that significantly reduced the post-divorce alimony support among women, I first show that this led to an increase in divorce probability. Second, consistent with the theoretical prediction from a simple model of labor supply, the reform led to an increase in the female labor force participation, with a larger increase among ever-married and more educated samples of women. As a result, the average female wage income increased after the reform. While labor supply increased, I show that most of this increase was concentrated in part-time employment, which may not be sufficient to compensate for the expected loss in alimony income. In light of the recent movement in the US to reform alimony laws, these findings are pertinent to understand its implications on women’s labor supply and economic well-being. The third chapter, co-authored with Akiva Yonah Meiselman, studies the long-run effects of disruptive peers in disciplinary schools on educational and labor market outcomes of students placed at these institutions. Students placed at disciplinary schools tend to have significantly worse future outcomes. We provide evidence that the composition of peers at these institutions plays an important role in explaining this link. We use rich administrative data of high school students in Texas which provides a detailed record of each student’s disciplinary placements, including their exact date of placement and assignment duration. This allows us to identify the relevant peers for each student based on their overlap at the institution. We leverage within school-year variation in peer composition at each institution to ask whether a student who overlaps with particularly disruptive peers has worse subsequent outcomes. We show that exposure to peers in highest quintile of disruptiveness relative to lowest quintile when placed at a disciplinary school increases students’ subsequent removals, reduces their educational attainment, and worsens labor market outcomes. Moreover, these effects are stronger when students have a similar peer group in terms of the reason for removal, or when the distribution of disruptiveness among peers is more concentrated than dispersed around the mean. Our findings draw attention to an unintended consequence of student removal to disciplinary schools, and highlights how brief exposures to disruptive peers can affect an individual’s long-run trajectories

This paper examines the relationship between the type of senior high school attended by Indonesian youth and their subsequent labor market outcomes. This topic is timely in light of a recent policy shift that aims to dramatically expand vocational education. The analysis controls for an unusually rich set of predetermined characteristics, and exploits longitudinal data spanning fourteen years to separately identify cohort and age effects. There are four main findings. First, the estimated wage premium for vocational graduates, relative to general graduates, is greater for women than men. Second, the returns to public vocational school for men have plummeted for the most recent cohort, and male vocational graduates now face a large wage penalty. Third, the generally favorable outcomes of public school graduates can be partly explained by non-random sorting of students with higher test scores and better-educated parents into public schools. Finally, these peer effects appear to be particularly important for students with above-average test scores, as men with high scores earn a surprisingly small premium from graduating from vocational or private general school. These small returns for high-scoring men, as well as the dramatic fall in the earnings premium for all male vocational graduates, raise important concerns about the current expansion of public vocational education and the relevance of the male vocational curriculum in an increasingly service-oriented economy.

This thesis analyzes labor market issues in Indonesia. The first chapter analyzes the insurance role of self-employment during the Asian Financial Crisis. Di erence in di erence estimation is used to estimate the e ect of having self-employed business before the crisis on household consumption and labor supply during the crisis. I find that households with self-employed business before the crisis could increase labor supply by a much lesser amount to maintain the same level of consumption compared with households without self-employed business before the crisis. The second chapter looks at the e ect of women's work hours on their intra-household bargaining power. I utilize direct information on household decision-making from the Indonesian Family Life Survey to construct direct measures of women's intra-household bargaining power. I also use regional price increase during the Asian Financial Crisis as an instrumental variable that positively a ects women's work hours but does not a ect women's bargaining power directly. I find evidence for a positive relationship between women's work hours and their intra-household bargaining power. The third chapter compares the Indonesian Family Life Survey and the Indonesian Labor Force Survey and tries to reconcile the inconsistencies between the two surveys in employment measures. After documenting and testing potential causes of the inconsistencies, I find that the inconsistencies are by large not reconcilable. The design of questions on working status in the survey and the treatment of unpaid family work, however, does seem to be a factor causing inconsistencies between the two surveys.

Research undertaken by the Economic Office.

This dissertation is comprised of three self-contained empirical chapters, each exploring how individuals in developing countries navigate their labor markets. In my first chapter, I study the impact of a migration boom on investment in education by Nepalese youths. I find that opportunities to migrate have had a negative impact on attainment of education, which calls attention of policy-makers to design programs that incentive schooling. In the second chapter, I study the value of political connections to labor market outcomes. I find evidence of additional human capital investment and improved labor market outcomes due to political connections. In the third chapter, I compare the earnings growth of individuals in Indonesia who remained in formal employment (salaried workers employed in firms with five or more workers) and those who switched into non-formal jobs. The research indicates that slow job creation had a significant impact on the welfare displaced workers. Each of these chapters deals with an aspect of the labor market that is common across many developing countries. Changing economic incentives, political contexts, and globalization all contribute to individual decisions and outcomes that have consequences for welfare in poor countries. By better understanding the relationship between the characteristics of the labor markets and individual decisions and outcomes, we can hope to develop policies that maximize the ability of developing countries' labor markets to facilitate the process of economic development.

This dissertation is comprised of three self-contained empirical chapters, each exploring how individuals in developing countries navigate their labor markets. In my first chapter, I study the impact of a migration boom on investment in education by Nepalese youths. I find that opportunities to migrate have had a negative impact on attainment of education, which calls attention of policy-makers to design programs that incentive schooling. In the second chapter, I study the value of political connections to labor market outcomes. I find evidence of additional human capital investment and improved labor market outcomes due to political connections. In the third chapter, I compare the earnings growth of individuals in Indonesia who remained in formal employment (salaried workers employed in firms with five or more workers) and those who switched into non-formal jobs. The research indicates that slow job creation had a significant impact on the welfare displaced workers. Each of these chapters deals with an aspect of the labor market that is common across many developing countries. Changing economic incentives, political contexts, and globalization all contribute to individual decisions and outcomes that have consequences for welfare in poor countries. By better understanding the relationship between the characteristics of the labor markets and individual decisions and outcomes, we can hope to develop policies that maximize the ability of developing countries' labor markets to facilitate the process of economic development.