| A major educational challenge that a developing country, such as Indonesia, faces is the consideration of cost-effective strategies to stimulate its human capital development. Over the past three and a half decades, many scholars have acknowledged the role educational investments play in improving people's living standards and the alleviation of poverty. However, there has been a controversy over the issue of which level of education would be the most profitable investment for economic and social transformation in developing countries. For instance, some World Bank researchers have concluded that primary education is the largest contributor to economic development in low-income countries, followed by general secondary education. However, other researchers have claimed that higher levels of education have a greater impact on economic growth in both low- and middle-income countries. This dissertation examines this controversy using a case study of Indonesia and investigates the educational situation of Indonesia utilizing data taken from the 1993 Indonesian Family Life Survey. The study analyzes how and in what ways different levels of education have contributed to Indonesia's economic development. By estimating the private rates of return to education by gender, location, ethnicity (religion), type of school admissions, and employment, the dissertation also investigates the diversity of educational experiences in Indonesia. By examining how rates of return to education vary within a country, this dissertation focuses on a type of issue which has not been discussed extensively in the literature: how the impact of education and educational policies varies among the diverse groups composing a society. The statistical results of this study indicate that primary education is the most rewarding educational investment in Indonesia, followed by junior secondary education. The returns in rural areas and lower income provinces are higher than those of their counterparts and the returns decline by level of education and average income of provinces. Female education is more rewarding than male education. Public education, especially public non-religious education, is the most rewarding investment from the individual point of view. The rate of return to education is higher in the private sector than in the public sector. |