Indonesia has experienced dramatic higher education expansion in the last two decades. The gross enrolment rate in higher education went from 15 percent in the early 2000s to 45 percent in the early 2020s, according to the World Bank. On the other hand, the employment prospects for higher education graduates seem to be getting worse, partly causing the wide-spread protests in Indonesia in recent years. How has the labour market return to higher education been changing over time? Why would young people choose to enrol in higher education if the labour market return is getting worse? This talk attempts to provide some insights on these questions by showing the trends in higher education enrolment, labour market returns, and other potential drivers of higher education enrolment in Indonesia, such as improving living standards, in the last two decades. We also try to find the main drivers of the expansion by conducting panel regressions at the district level of enrolment rates on a set of potential determinants. To establish a more causal relationship between higher education expansion and labour market returns, we also conduct cohort difference in difference analysis using the opening of new higher education institutions as a supply shock to enrolment rates.

Pembicara: Sarah Dong (Arndt-Corden Department of Economics, The Australian National University)