After the Big Bang: Estimating the Effects of Decentralization on Educational Outcomes in Indonesia through a Difference-in-Differences Analysis

Decentralization is a prominent feature of education policy debates around the world. Proponents
of decentralization argue that bringing decisions closer to the people improves school efficiency
and quality by ensuring that schools are more responsive to local educational needs and
empowering communities to hold schools accountable for education provision. In practice, the
effects of decentralization vary substantially given that the implementation of these reforms
relies on local resources and management capacity. In this paper, I use a difference-indifferences
model to estimate the effects of decentralization on achievement and teacher effort in
Indonesia by leveraging school level longitudinal data from the Indonesian Family Life Survey. I
find no overall effect of decentralization on achievement, but a negative effect on teacher effort,
particularly in rural areas and among schools with inactive school committees. These findings
demonstrate the limits of decentralization in resource-constrained settings.