EA - Does putting kids in school now put money in their pockets later? Revisiting a natural experiment in Indonesia by droodman

Link to original articleWelcome to The Nonlinear Library, where we use Text-to-Speech software to convert the best writing from the Rationalist and EA communities into audio. This is: Does putting kids in school now put money in their pockets later? Revisiting a natural experiment in Indonesia, published by droodman on November 25, 2022 on The Effective Altruism Forum.Open Philanthropy’s Global Health and Wellbeing team continues to investigate potential areas for grantmaking. One of those is education in poorer countries. These countries have massively expanded schooling in the last half century. but many of their students lack minimal numeracy and literacy.To support the team’s assessment of the scope for doing good through education, I reviewed prominent research on the effect of schooling on how much children earn after they grow up. Here, I will describe my reanalysis of a study published by Esther Duflo in 2001. It finds that a big primary schooling expansion in Indonesia in the 1970s caused boys to go to school more — by 0.25–0.40 years on average over their childhoods — and boosted their wages as young adults, by 6.8–10.6% per extra year of schooling.I reproduced the original findings, introduced some technical changes, ran fresh tests, and thought hard about what is generating the patterns in the data. I wound up skeptical that the paper made its case. I think building primary schools probably led more kids to finish primary school (which is not a given in poor regions of a poor country). I’m less sure that it lifted pay in adulthood.Key points behind this conclusion:The study’s margins of error” — the indications of uncertainty — are too narrow. The reasons are several and technical. I hold this view mostly because, in the 21 years since the study was published, economists including Duflo have improved collective understanding of how to estimate uncertainty in these kinds of studies.The reported impact on wages does not clearly persist through life, at least according to a method I constructed to look for a statistical fingerprint of the school-building campaign.Under the study’s methods, normal patterns in Indonesian pay scales and the allocation of school funding can generate the appearance of an impact even if there was none.Switching to a modern method which filters out that mirage also erases the statistical results of the study.My full report is here. Data and code (to the extent shareable) are here.BackgroundThe Indonesia study started out as the first chapter of Esther Duflo’s Ph.D. thesis in 1999. It appeared in final form in the prestigious American Economic Review in 2001, which marked Duflo as a rising star. Within economics, the paper was emblematic of an ascendant emphasis on exploiting natural experiments in order to identify cause and effect (think Freakonomics).Here, the natural experiment was a sudden campaign to build tens of thousands of three-room schoolhouses across Indonesia. The country’s dictator, Suharto, launched the big push with a Presidential Instruction (Instruksi Presiden, or Inpres) in late 1973, soon after the first global oil shock sent revenue pouring into the nation’s treasury. I suspect that Suharto wanted not only to improve the lot of the poor, but also to consolidate the control of his government — which had come to power through a bloody coup in 1967 — over the ethnically fractious population of the far-flung and colonially constructed nation.I live near the Library of Congress, so I biked over there to peruse a copy of that 1973 presidential instruction. It reminded me of James Scott’s Seeing Like a State, which is about how public bureaucracies impose homogenizing paradigms on the polities they strive to control. After the legal text come neat tables decreeing how many schools are to be built in each regency. (Regencies are the second-level administrative unit in Indonesia, below provinces.) After the tables come pages of architectural plans, like the one at the top of this post.T...