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Educational assistance and education quality in Indonesia: The role of decentralization

Virgi Sari

17th Nordic Conference on Development Economics

June 12, 2018

Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 1 / 24

Overview

Aim to examine the role of decentralization in explaining education quality in Indonesia. The study used a longitudinal household survey and applied policy evaluation method. The paper found decentralization improved education quality both in public and private schols. Yet, it has a spill-over effect toward private education - private schools are catching up. Institutional features of education provision matters. There is an indication

• f collusion and social norms underlying the mechanism, i.e. different

preference in allocating fund toward private schools.

Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 2 / 24

Why Education?

Theory of human capital: human capital is the key for economic growth and development (Becker, 1962; Schultz, 1961). Despite being in the center of aid and development objective in developing world, improving quality (over quantity )of learning remains a challenge.

100000 200000 300000 400000 expenditure (in Rp) 2000 2004 2008 2012 Year

Agriculture Education Gov Adm Health Infrastructure Social Protection Subsidies Source: INDO-DAPOER, World Bank (2017)

Government Expenditure by Sector Figure 1: Trend in Government Expenditure by Sector (2001-2012)

Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 3 / 24

The more the better?

Figure 2: PISA Score in Math and Reading Worldwide (2015)

Source: OEDC (2015)

Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 4 / 24

The Role of Education Assistance

Scholarship programme School subsidy School operational assistancec Education component within the CCT (Largest scale of CCT worlwide) But... Weak link between education spending and education quality (World Bank, 2013). Education initiatives only effective in improving learning outcomes when social norms factored in the design (Masino and Nino-Zarazua, 2016).

Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 5 / 24

Education during Post-Decentralization Era

Spending more or spending better: Improving education financing in Indonesia

Who manages what in Indonesia's decentralized education system?

Since the local government autonomy law in 2001, district governments are responsible for managing the two main assets at the primary and secondary education levels: schools and teachers. Legally, primary and secondary schools are owned by district governments. In fact, when it comes to budgets, the school's legal status is similar to that of a district government department. Similarly, civil service teachers are legally district government employees, although the hiring process, like that of other civil servants, depends on a number of central government ministries, including the Ministry of Finance (MoF) and the Ministry of State Personnel and Bureaucracy Reform (MenPAN). Even contract teachers are largely district employees, although some are hired directly by schools. MoRA's management structure is different, since it maintains a centralized system for its public schools and civil service teachers, and relies more heavily on private funds. Provincial governments have very limited authority when it comes to schools, mostly coordinating districts at the basic and secondary levels

• f education, including with regard to staff development and the provision for education facilities.

Table 1: Decentralized education management by level of education

poliies,tor Curriculum Provision/

standards

and deveop ent service MIS atschoolleve delivery

NOON U

CENTRAL Early Childhood MEN DISTRICT

EUOM

I

CENTRAL Basic

MEN

DISTRICT

NOON e

I

CENTRAL Secondary

P

MEN

DISTRICT

agag agag

MgNg Sggg

CENTRAL Tertiary

Source: elaboration based on Law 20/2003, King et al. (2004) and PP 38/2007. Notes: Financing responsibilities in the table reflect the main responsibilities under education program assigned to specific level of

• government. However, partial financing in some programs is shared between different levels of governments: besides higher education,

central government provides financing to other education programs, including through school rehabilitation financing, scholarship funding, and until 2011 it also administered School Operation Funds (BOS). Provincial governments also provide partial financial assistance in senior secondary education and to special needs schools.

The central government formulates policy, issues regulations/guidelines and standards at the national level, and still directly controls higher education. MoEC, together with the National Education Standards Agency (BSNP), develops national education standards in eight areas: content/curriculum, processes, graduate competencies, education staff, facilities and infrastructure, management, financing and educational assessment." MoEC also issued Minimum Service Standards (MSS) for all education levels and the recent Joint Decree (2011)

12 According to PP 19/2005.

Figure 3: Post-decentralization Education Management

Source: World Bank (2013, Table 1, p. 12)

Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 6 / 24

The doubled edged sword of a decentralized planning

Two diverging views on the effect of decentralization: Decentralization let government to be more responsive to the governed (e.g. Olowu and Wunsch, 1990; World Bank, 1994). In education:

adapt to local educational needs (Di Gropello & Marshall, 2009) accountability between schools and communities shared sense of responsibility across actors (Grauwe, 2005)

Decentralization effects on public service provision are varied to local government capacity (e.g. Crook & Sverrisson, 1999). Local governments are vulnerable to:

corruption elite capture lacking in technical, human, and financial resources

Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 7 / 24

Study Design

Hypothesis - Decentralization affects education outcomes through:

increased provision of education assistance school and community efforts, social norms

Data

Longitudinal data on school characteristics and education outcomes from Indonesian Family Life Survey (IFLS). Period: 2000 and 2007.

sample

Exclusion criteria: Catholic schools, DKI Jakarta, extreme values.

Setup - compare the changes in education outcomes:

before and after decentralization took place in 2001 between public (treatment) and private schools (control) heterogeneity in outcomes by type of schools and communities

Empirical strategy:

DID: difference-in-difference SDID: semi-parametric diff-in-diff (Abadie, 2005)

balance check Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 8 / 24

Decentralized Education

Post-decentralization, more of public schools are managed by the district education office. It includes transfer of a degree of authorities to the district sub-national government including e.g. teacher hiring.

20 40 60 80 100 Share of schools (%) 2000 2007 2014 public private public private public private

Source: Own calculation based on IFLS rounds

in Public and Private Schools

Distribution of schools by administrator

MoEc MoRA Community district

• ther

Figure 4: Distribution of schools by administrator

Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 9 / 24

Trends in Education Outcome: Students’ Achievement

4 4.5 5 5.5 6 6.5 7 7.5 8 test score 1995 2000 2005 2010 year public private

score_bahasa

4 4.5 5 5.5 6 6.5 7 7.5 8 test score 1995 2000 2005 2010 year public private

score_math

Figure 5: Trend in Average Language and Math Test Score (1997-2007)

Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 10 / 24

Result: Unintended consequence of decentralization

Decentralization helps to improve learning outcomes, yet less of those of public schools. It shows a story of ‘spill-over’ effect.

• .63
• .63
• 1 -.8 -.6 -.4 -.2 0

Test Score effect of decentralization basic extended

DID Language Test

• .56
• .47
• 1 -.8 -.6 -.4 -.2 0

Test Score effect of decentralization basic extended

SDID Language Test

• 1.1
• 1.1
• 1-.8-.6-.4-.2 0

Test Score effect of decentralization basic extended

DID Math Test

• .76
• .69
• 1 -.8 -.6 -.4 -.2 0

Test Score effect of decentralization basic extended

SDID Math Test

Source: Own calculation based on IFLS 2000 and 2007.

Figure 6: The Effect of Decentralization on Education Quality

Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 11 / 24

The Mechanism

There are four possible stories which can expain how decentralization affects edu- cation outcomes: education assistance

here

altruistic behaviour of local institutions

here

inequality in school efforts

here

community efforts

here Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 12 / 24

M01: Increased Provision of Education Assistance

Mechanism#01: decentralization led to increased coverage of education assistance, but more allocation is toward private schools. Post-decentralization, government and communities allocate more education transfer toward private schools.

• 2.9

1.1

• 3
• 4
• 3
• 2
• 1

1 2 3 4

% change in ratio of beneficiary

effect of decentralization

perc_gov perc_schcomm perc_comm

Ratio of Beneficiaries

5.9

• 4.6

8.4

• 50
• 40
• 30
• 20
• 10

10 20 30 40 50

size of Education transfer (in Rp)

effect of decentralization

amount_gov amount_schcomm amount_comm

Size of Education Transfer

Source: Own calculation based on IFLS 2000 and 2007.

Figure 7: The Effect of Decentralization on Education Assistance

back Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 13 / 24

M02: Altruistic behaviour of local institutions

Post-decentralization, religious schools improved education outcomes more than the non-religious counterpart. Indication of community preference driven by social norms, in this case religion.

• .81

.53

• 2
• 1.5
• 1
• .5

.5 1 1.5 2

Test Score

effect of decentralization

nonreligious religious

Language Test

• 1.9

.35

• 2
• 1.5
• 1
• .5

.5 1 1.5 2

Test Score

effect of decentralization

nonreligious religious

Math Test

Source: Own calculation based on IFLS 2000 and 2007.

Figure 8: The Effect of Decentralization among Religious and Non-Religous

back Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 14 / 24

M03: Falling teacher’s performance

Mechanism#03: Decentralization affects ducation quality through levelling-off teachers’ efforts.

• 5.2
• 5.2
• 8
• 6
• 4
• 2

2 4 6 8 Working Hours effect of decentralization basic withcovariates

Teaching Hours

3.6 3.6

• 8
• 6
• 4
• 2

2 4 6 8 Working Hours effect of decentralization basic withcovariates

Working hours spent in other job

Figure 9: The Effect of Decentralization on Teacher’s behaviour

Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 15 / 24

M03: School Governance

• .57
• 1.1
• 1.1
• .55
• 2
• 1.8
• 1.6
• 1.4
• 1.2
• 1
• .8
• .6
• .4
• .2

Test Score effect of decentralization

all central district comm

score_bahasa

• .93
• 1.5
• 1.5
• .91
• 2
• 1.8
• 1.6
• 1.4
• 1.2
• 1
• .8
• .6
• .4
• .2

Test Score effect of decentralization

all central district comm

score_math

Figure 10: The Effect of Decentralization by School Head Election Type

back Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 16 / 24

M04: Community Efforts

Mechanism #04: Decentralization influences education outcome through increased community efforts, e.g. parents engagement in school-committee. Yet, it is not the case; common view from pre-decentralization period prevails - “Education is the responsibility of government”

2 4 6 8 10 meetings (n) 2014 2007 private public private public

Source: Own calculation based on IFLS rounds

in public and private schools

Committee Meeting

2 4 6 meetings (n) 2014 2007 private public private public

Source: Own calculation based on IFLS rounds

in public and private schools

Committee Meeting with Parents

Figure 11: Trend in Community Efforts

Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 17 / 24

M04: Community Efforts

• .67
• .44
• 1.2-1 -.8-.6-.4-.2 0

Test Score effect of decentralization

basic withcovariates

active communities

DID Language Test

• .57
• .7
• 1.2-1 -.8 -.6 -.4 -.2 0

Test Score effect of decentralization

basic withcovariates

passive communities

DID Language Test

• 1.1
• .96
• 1.2
• 1-.8
• .6
• .4
• .20

Test Score effect of decentralization

basic withcovariates

active communities

DID Math Test

• 1
• 1.1
• 1.2
• 1-.8-.6-.4-.2 0

Test Score effect of decentralization

basic withcovariates

passive communities

DID Math Test

Figure 12: The Effect of Decentralization in Active vs Passive Communities

back Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 18 / 24

Discussion: Story of Collusion?

Is story of collusion behind the catching-up of private schools?

Behaviour of local institutions - allocation of education finance is biased toward a particular schools driven by social norms, e.g. private and religous schools. Collusion - increased school authority through decentralization may enforced rent-seeking behavior between local institutions, e.g. cases where school head who’s not democratically elected.

Alternative story?

School Competition - worse off private schools are losing out, hence dropping altogether from the playing field; resulting to the ‘overall’ push on the education quality of private schoos.

back Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 19 / 24

Lessons learned

Thus far, the preliminary findings show:

Education outcomes gradually improved in the past two decades. But, decentralization improved education outcomes more of students in private schols. The spill-over effect story of decentralized education; students in private school performs better. Institutional features of education provision matters, social norms need to be incorporated in the design of education policies.

What’s next?

Extend analysis to other waves, running from 1993-2014. Examining the alternative stories.

Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 20 / 24

Key References

Abadie, A., 2005. Semiparametric difference-in-differences estimators. The Review of Economic Studies, 72(1), pp.1-19. Di Gropello, E. and Marshall, J.H., 2011. Decentralization and educational performance: evidence from the PROHECO Community School Program in rural Honduras. Education Economics, 19(2), pp.161-180. Houngbedji, K., 2016. ABSDID: Stata module to estimate treatment effect with Abadie semiparametric DID estimator. Statistical Software Components. Pedro, C.I., 2013. Spending more or spending better: improving education financing in

• Indonesia. The World Bank Jakarta.

Villa, J.M., 2016. diff: Simplifying the estimation of difference-in-differences treatment

• effects. Stata Journal 16, pp. 52-71.

Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 21 / 24

Thank you!

Disclaimer: This is a work-in-progress presented at 17th Nordic Conference on Development Economics (Helsinki, 12 June 2018). Not to be quoted under any

• circumstances. The research is funded by the Indonesia Endowment Fund for Education (LPDP) and is supported through UNU-WIDER PhD Internship
• Programme. The author is grateful to Miguel Nino-Zarazua for his thorough guidance and UNU-WIDER colleagues for their feedbacks. The views expressed

herein are those of the authors and does not represent the affiliated institutions. Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 22 / 24

Sample Selection and Baseline Check

Sample selection N of Schools Full-sample DID SDID Total 3275 1633 737 Public Schools 1459 821 212 Private Schools 4734 2454 949

Table 1: Sample Selection

Baseline check Students’ performance mean DID SDID Language Score 6.575

• 0.886***
• 0.751***

Math Score 6.068

• 1.179***
• 0.743***

Table 2: Baseline Check

back Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 23 / 24

Sample Selection and Baseline Check

Original Sample Reweighted Sample Variables PV PC t-stat sig.level PV PC t-stat sig.level sanitation 0.67 0.591 3.831 *** 0.657 0.54 3.029 *** villrev total 109.743 120.317

• 1.08

98.91 107.096

• 0.538

share poorhh 23.379 26.982

• 3.117

*** 27.521 26.859 0.304 urban 0.72 0.592 6.389 *** 0.645 0.543 2.618 *** dist district 16.901 17.683

• 0.772

18.064 20.342

• 1.184

n activegroups 4.854 4.832 0.308 4.7 4.763

• 0.48

teacher primary 0.001 0.001 0.501 0.005 0.001 0.956 teacher lowsec 0.073 0.052 2.06 ** 0.093 0.055 1.956 * teacher upsec 0.135 0.158

• 1.45

0.186 0.142 1.539 teacher tertiary 0.913 0.851 4.27 *** 0.902 0.874 1.081 teacher year 12.672 16.527

• 12.881

*** 12.626 16.054

• 6.477

***

Table 3: Covariates Balance Chek

back Virgi Sari (Global Development Institute) Decentralization and Education Quality June 12, 2018 24 / 24