Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/338969 
Year of Publication: 
2026
Series/Report no.: 
GLO Discussion Paper No. 1731
Publisher: 
Global Labor Organization (GLO), Essen
Abstract: 
This study documents substantial heterogeneity in returns to education by childhood poverty status among Indonesian wage workers aged 15-35. Individuals who grew up poor earn only 1.5 percent per additional year of schooling-less than onefourth of the 6.8 percent earned by those who were never poor. We estimate these returns using a control-function approach that exploits conditional heteroskedasticity for identification in the absence of exclusion restrictions. The control-function coefficient is three times larger among the poor, indicating markedly stronger positive selection into schooling in this group: only individuals with exceptionally favorable unobserved characteristics attain higher levels of education. We also present descriptive evidence of lower skill accumulation per year of schooling and more limited access to high-paying jobs among disadvantaged individuals, patterns consistent with lower marginal returns. These findings highlight the limited equalizing role of education, measured here by years of schooling.
Subjects: 
Returns to Education
Childhood Poverty
Control-Function Approach
JEL: 
I24
I26
I3
Document Type: 
Working Paper

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