Returns to Tertiary Education among Employed Individuals in Indonesia: Propensity Score Matching Evidence
Abstract
Tertiary education is associated with higher earnings, yet its income returns among employed individuals in Indonesia require further examination. This study examines the income advantage associated with tertiary education using cross-sectional data from the fifth wave of the Indonesian Family Life Survey, involving 1,112 employed individuals. Propensity Score Matching (PSM) was applied to reduce observable selection bias and estimate the Average Treatment Effect on the Treated (ATT). Propensity scores were estimated using disability status, household size, household income, parental education, sex, and residence. Nearest-Neighbor, Kernel, and Radius-Caliper Matching were employed to assess robustness. The results indicate improved comparability between treatment and control groups, with Kernel and Radius-Caliper estimates showing that tertiary-educated workers earned approximately 37.74%–44.27% more than comparable workers with secondary education or below. Household income and parental education were positively associated with tertiary-education completion, indicating unequal access. These findings highlight the importance of equitable educational access, improved educational quality, and stronger alignment between graduate competencies and labor-market demands.
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DOI: https://doi.org/10.32535/jicp.v9i4.5176
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