WoPEDS | Working Papers

It is well established that infrastructure investment plays significant role in the acceleration of development through its impact on growth, sector performance and socio-economic indicators.  West Java Province is province with the largest population in Indonesia and main contributor to national GDP. In this study, the impact of increased national infrastructure investment in West Java Province is assessed using 2014 data. JaBarTERM5 CGE model is used to simulate two infrastructure investment scenarios, the moderate scenario or increase in government national infrastructure investment only, and the progressive scenario that combines government national infrastructure investment with private investment.  The results indicate that under the moderate scenario, West Java GRDP increased by 1.91% (1.91 percentage point compared to baseline, while in the progressive scenario (national plus private infrastructure investment), GRDP increased by up to 3.58% (3.58 percentage point compared to baseline). However, there are differential responses at district level. Districts that experience the highest increase in GRDP are districts close to industrial areas in the vicinity of Jakarta and Bandung. When viewed from its impact on provincial employment, it increases by 2.27% (2.27 percentage point compared to the baseline case) under the progressive scenario. The employment impact is particularly more pronounced in districts […]

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This study analyzed the effect of Early Childhood Education on Academic Achievement in Indonesia. This study used kindergarten education and National Test Score of Indonesian Language and Math as the main subject of research. This study obtained the sample from Indonesian Family Life Survey (IFLS) 2007. The econometric method, that this study used, was Ordinary Least Square (OLS). This study presented the estimation based on school level, primary and secondary. This study founded that kindergarten education (formal Early Childhood Education) affected National Test Score of Indonesian Language and Math significantly if other factors did not add in the regression. This finding caused the effect of kindergarten education to National Test Score became not valid or biased. The problems like high cost of early childhood education and lack of teacher could be the reason why the effect of early childhood education was not maximal. This problems can be the the next subject of research about early childhood education. DOWNLOAD

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In this paper, I examine the sustainability of Indonesian fiscal policy by looking at how the primary balance-to-GDP ratio has responded to variations of the debt-to-GDP ratio, as suggested by Bohn’s (1998) Model Based Sustainability approach. This approach is motivated by dissatisfaction with most of the literature that use unit root and cointegration tests in combination with the intertemporal budget constraint. It is argued that unit root or cointegration tests have low power in rejection unit root from near unit root alternatives. Furthermore, Bohn (2005) shows that the consistency with the intertemporal budget constraint (IBC) is not a sufficient condition for debt stationary. It is possible to satisfy the IBC while simultaneously having a mildly explosive path of debt-to-GDP ratios. Using a data set covering the period 1990 – 2010 and controlling for measures of cyclical variations in GDP and temporary government expenditure, I find a significantly positive response of the primary balance-to-GDP ratio to variations in the debt-to-GDP ratio, and that response has been stable since 2000.  Moreover, I also find that the debt-to-GDP ratio tends to be mean-reverting due to a nominal growth dividend. These results suggest that the government have significant and strong fiscal response to changes […]

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Level of economic development has been found to be among the strongest determinants of corruption level in cross-country studies. Those studies use income per capita as a measure of level of development and found that higher level of corruption is associated with lower level of income. We argue that, at any given income level, education is also a very important determinant of the level of corruption and failing to include education may bias or over-estimate the importance of income. We estimated an empirical model of individual’s attitude toward anti-corruption using a large sample of 9,020 individuals that represent Indonesian population and find that the effect of income (proxied by expenditure) is either weakened or eliminated when we control for the level of education. The effect of education is also found to exhibit a non-linear pattern which implies that investing in education will have increasing returns in the form of anti-corruption attitude. This finding supports the view that increasing access to education is an effective measure of reducing corruption norms particularly in developing countries. DOWNLOAD

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Social interactions may encourage the cooperative behaviours by triggering either self-image concerns (when one sees others’ decisions without being seen) or social-image concerns (when one’s decision is seen by others). A laboratory experiment is designed to compare these two concerns directly, using a four-players finitely repeated public goods experiment on two directed star networks, self-image and social-image networks. The comparison of the players voluntary contributions in both types of networks reveals that their contributing behaviours are statistically indistinguishable. However, the players who belong to the self-image network are more willing to conform with the group behaviours, meaning that they will increase (reduce) the contributions if theirs are below (above) their groups average. Furthermore, I also find evidence that the contributing behaviours are more stable in the self-image networks than in the social-image network. DOWNLOAD

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The debate over debt issues always becomes hot potatoes to be discussed. Recent data in debt position which accounted for 1.977,71 trillion IDR on December 31st 2012 has made a thousand eyes looking at The Central Government and questioning whether Indonesia should continue to rely on debt for development financing, and whether its debt level is dangerous for fiscal sustainability or not. This paper analyzes debt sustainability by using Natural Debt Limit (NDL) approach introduced by Mendoza-Oveido. In order to examine how the Indonesian government reacts to changes in its debt position, this paper estimates fiscal reaction functions using an econometric approach, namely Vector Error Correction Model (VECM). The result shows that: (i) natural debt limit for Indonesia is 32,3% over GDP; (ii) since 1992 the central government has run a sustainable fiscal policy, by reducing the primary deficit or increasing the surplus in response towards rising debt. Indonesia has a space to utilize more debt, but in a good manner (well-managed) especially aimed for productive and priority spending such as for infrastructure and education. DOWNLOAD

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I estimate the higher education access gap among individuals who study in different type of upper secondary school. I use a non linear Binder-Oaxaca decomposition as de-pendent variable is a binary choice. The sample data is a household data that pull out from three waves of Indonesia Family Life Survey (IFLS). The results show that student from public school has higher chances to attend post secondary education as compared to private Islam and private secular group, whereas, private Christian is superior than pub-lic school. The evidence also indicates there are considerable differences between public school, private non-religious and Islamic school graduates in academic achievement and socio-economic characteristics. Parents’ education and academic achievement provides important contribution to a low probability of entering higher education for private non religious school graduates. While father’s education and family income contribute sub-stantially to a low probability of accessing higher education for the private non religious group. DOWNLOAD

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Shocks, such as economic crisis, that occur in the critical periods of children development are believed to have lasting effects. Using data from Indonesia Family Life Survey (IFLS), this study investigates the timing issue and whether Asian Financial 1997/1998 crisis has impacts on child health and cognitive development in Indonesia. By running pooled cross-section model, this study finds that generally crisis has not had negative impacts on child health and cognitive development for those who were poor. Yet, in urban areas, crisis struck harder and negatively affected the cognitive score of specific age groups. This study also finds that the critical periods of children development might be in the first two years of early life. Expenditure levels and mothers’ education are strong predictors for child health and cognitive development. DOWNLOAD

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Over the past few decades, Indonesia has made strong progress in improving education outcomes, with a particularly emphasis being placed on access to basic education in line with the government’s nine-year compulsory education policy. As in many other developing countries, moving beyond gains in education access and toward meaningful gains in education quality has been a greater challenge for Indonesia, however several notable positive trends have emerged. While the progress achieved specifically in terms of improving the quality of education remains a work in progress, several positive developments have emerged in recent years. Some of the key drivers of progress discussed in this report include strengthening the teaching force, reforming the curriculum and pedagogy, decentralization and school-based management, and increased budget and targeted support to address inequities. The diversity of reforms that have emerged and the use of research and evaluation to inform policy-making make Indonesia’s experience a particularly interesting case study with some useful lessons to offer. Published version (July 2014) of this paper can be accessed in http://www.odi.org/publications/8563-towards-better-education-quality-indonesias-promising-path DOWNLOAD

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The Inter-Regional System of Analysis for ASEAN (IRSA-ASEAN) is a static, multi-country, computable general equilibrium (CGE) model. It is a unique model constructed to understand the impact of coordinated and non-coordinated policies, e.g. energy subsidy reduction and carbon tax implementation, on the economic and environmental performances of six of the ten member countriesof ASEAN, namely Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam. Although it is robust enough to be an insightful tool for policy analysis in other issues, e.g. trade, the IRSA-ASEAN model contains a unique feature that makes it particularly valuable for policies related to environment and energy sectors, namely endogenized revenue recycling mechanisms. This paper is intended to become a technical manual for the IRSA-ASEAN model that will help to better analyze empirical results in the authors’ other papers. DOWNLOAD

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