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Lecture 5

ECON 30801 Lecture Notes - Lecture 5: Compulsory Education, Natural Experiment, Marginal Utility

Course Code
ECON 30801

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I. Education
A. The Supply side of education
1. Almost all research is on the supply side
2. Building schools, physical input (providing technology, textbooks, etc.),
teaching inputs (incentivizing teachers), compulsory education, etc.
3. Almost the entire world has free elementary/primary education
a) Still some costs (uniforms, opportunity costs of going to school
instead of work, etc.)
B. Building schools in Indonesia
1. Between 1973-76, Indonesia constructed 61,000 primary schools
a) 1 school per 500 school-aged children
2. This was not a RCT - so how do we compare and see what the actual
benefit of the schools were?
3. Another natural experiment - compare to individuals just above
a) How did educational attainment differ?
b) Affected “treatment” group are those 12 years or younger when
the school opened in 1974 (primary schooling in Indonesia runs to
age 12, so looking at students born post-1962, or 0-12 years old
when the schools started opening)
c) Unaffected “control” group are those born just after 1962 because
they are too old to get the benefit of a lot of new primary schools
d) Identifying assumption: the affected treatment group and the
unaffected control group are similar except some people got
access/treatment and others didn’t
(1) People who just missed access to schools are “similar” to
those who get access to schools
e) (0-12 years old in 1974)Education ducΔtreatment =E0−12 Educ13−17 =
- (13-17 years old in 1974)
f) Education ducΔcontrol =E0−12 Educ13−17
g) ffect ΔEduc EducE = treatment − Δ control
(1) Need to subtract the difference here because there is
some advancement in education that just comes when
countries develop, not all based on building of new schools
h) Educational gains by age - the younger you were when the
schools were built, the more you go to school
(1) Program causes 0.12 year increase in schooling
attainment - and nothing about quality, only quantity
(2) Especially when looking at average years of schooling in
Indonesia vs. U.S.
(3) Poor Economics, Chapter 4
II. The Demand for Education
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