Monetary and Nonmonetary Returns to Education in Indonesia

Abstract

Some important aspects of returns to education in Indonesia have been neglected. This paper draws on the Indonesia Family Life Survey, a longitudinal survey, to shed some light on these aspects. This paper finds in a Mincerian specification that a more recent rate of return is in line with the rates found in previous research. A quantile regression is applied to show that the rate varies little in the conditional distribution of earnings, which stands in stark contrast to findings from some developed countries. In addition, the rate of return in self-employment is estimated to be lower than that in paid employment for person- and sector-specific reasons. In addition to monetary returns to education, happiness returns to education are considered. This paper advances evidence that education has important and robust implications for happiness above and beyond absolute and relative levels of income. © 2013 Institute of Developing Economies.