Slide 1 In schooling model, the wage gap between high-educated and low-educated workers is one of the key factors

to study. And throughout the many cases, it was found that developing countries has higher wage gap than in industrialized economies, which also infers that developing labor markets tend to offer a high rate of return to schooling. And the textbook mentions about school construction in Indonesia. In 1973, the Indonesian government launched a school construction program called INPRES, which was designed to increase the enrollment of children in disadvantaged area. Throughout the program, more than 61,000 schools were built. And it cost over $700 million, which was 1.5% of Indonesia GDP as of 1973. Slide 2 So, overall, INPRES was successful in terms of effectiveness by increasing enrollment rate of elementary school from 69 percent to 83 percent. Also, when you look at the data drawn from the Indonesian labor market, which is in the next slide, you can figure if school construction program was worth the huge investment at that time. Slide 3 So, this table illustrates how education and earnings were affected by residing two different parts of Indonesia one is low-construction area where relatively few schools were built, and the other one is high-construction area where many new schools were built during the construction program. And these two demographic groups were about to enter school as the construction program began, and they form as treatment group. Also, as you can see, these numbers represent years of education, and here are the differences from two sample areas. And finally you subtract 0.36 from 0.47 then the outcome come out to be 0.11 which is difference in differences. I think its called in this way because you find difference from two differences of each samples. And this number indicates that additional construction increased educational attainment by 0.11 year And same approaches with log wages; earnings of younger group living in highconstruction area rose by an additional 3 percent. Slide 4 And finally, we can calculate the rate of return to schooling in Indonesia. Refer to the data from the table, each additional 0.11 year of schooling increased earnings by 3 percent. This implies that each additional year of school increased earnings by 27 percent. Resultantly, the rate of return to schooling in Indonesia seems fairly high, which supports that the expenditure on school construction program was used effectively.