Dropping Out in Uncertain Times: Educational Investment Decisions in a Changing Labor Market
Presented by:
Jacob Bills
Practice Job Talk
Department of Agricultural and Applied Economics
University of Wisconsin-Madison
Thursday, September 25, 2025
3:45 pm-5:00 pm
Taylor-Hibbard Seminar Room (Rm103)
Despite high levels of investment into secondary school education, around one quarter of Indonesian students do not complete high school which previous studies suggest is in part due to changes in demand for skilled and unskilled labor. In this paper, I investigate how students respond to one signal of this demand, the distribution of skilled wages, and how uncertainty about this distribution, proxied with variance, contributes to students not completing high school. To do this, I combine individual educational decisions from the years 1999 to 2014 found in the Indonesian Family Life Survey with regional wage distributions from Indonesian National Labor Surveys for those same years. After accounting for endogeneity of skilled labor demand using Bartik-like instrumental variables, I am unable to find a significant effect of the variance of the skilled wage distribution on educational decisions. However, I do see signs of heterogenous effects. I discuss potential reasons for these findings and propose future research that would be better able to answer these questions.