Education Transfers, expenditures and child labour supply in Indonesia: An evaluationof impacts and flypaper effects

In this paper we investigate how the receipt of educational transfers, scholarships and related assistance programmes affects the labour supply of children and the marginal spending behaviour of households on children’s educational goods. We use a nationally representative household survey of unusual scope and richness from Indonesia. We found strong evidence of educational cash transfers and related assistance programmes significantly decreasing the time spent by children on income-generating activities in Indonesia. Households receiving educational transfers, scholarships and assistance were also found to spend more at the margin on voluntary educational goods. These results were stronger on children living in poor families. The findings of this study lend support to the growing view in the literature that educational transfers, scholarships and related assistance can actually have a positive impact on economic development by increasing the level of investment in human capital. Our results are particularly relevant for understanding the role of cash transfers and education assistance in middle-income countries, where enrolment rates are already at satisfactory levels, but the challenge is to keep post-primary students in school. Finally, the principle message that emerges from the study is: there are quantitatively non-negligible, average gains from educational transfers and support programmes on household education spending and child labour, especially for the poor.