Did Social Safety Net Scholarships Reduce Drop-Out Rates during the Indonesian Economic Crisis?

This paper uses regression and matching techniques to evaluate Indonesia’s Social Safety Net Scholarships Program. The scholarships program was developed to try and prevent large numbers of children from dropping out of school as a result of the Asian crisis. The expectation was that many families would find it difficult to keep their children in school and drop out rates would be high like they were during the 1980's recession. Drop-outs however have not increased markedly and enrolment rates have remained relatively steady. This paper examines the role played by the scholarship program in producing this result. The scholarships were found to have been effective in reducing dropouts at the lower secondary school level by about 3 percentage points but had no discernible impact at the primary and upper secondary school levels. We also examine how well the program adhered to its documented targeting design and how effective this design was in reaching the poor. The targeting criteria appear to have been followed quite closely but this did not prevent some households with high reported per capita expenditures receiving the scholarship. * I would like to thank Vivi Alatas, Stephen Baines, Deborah Cobb-Clark, Deon Filmer, Emanuela Galasso, Gavin Jones, Santosh Mehrotra, Menno Pradhan, Lant Pritchett, Jerry Strudwick, Sudarno Sumarto, Yusuf Suharso, Asep Suryahadi, Duncan Thomas, and participants at the RAND Labor and Population Program and World Bank seminars for helpful comments. The assistance of Asep Suryahadi and Yusuf Suharso with the matching of the different rounds of data was invaluable. Research support from the World bank, UNICEF, and SMERU is gratefully acknowledged. Addresses for correspondence: Department of Economics, University of Melbourne, Victoria, 3010, Australia. Email: [email protected]