Educational assistance and education quality in Indonesia: The role of decentralization

The evolution of educational assistance in Indonesia and its effect on education quality was examined following two decades of government decentralization. Using Indonesia Family Life Survey data, the variation in the implementation of government decentralization was exploited to compute differencein-differences estimators. Indicative evidence suggests that decentralization has facilitated collusion between village authorities and marginalized private schools, with substantial increases in educational assistance and financial resources to private schools. Despite dominant rent-seeking behavior and motives of self-interest, increased public resource allocation to private schools had a positive impact on student achievement. The results also emphasize the role of social norms in undermining the efficient allocation of public goods after decentralization.