Parchment Power

How education shapes economic growth in Indonesia

In the sprawling archipelago of Indonesia, a fascinating study has emerged, shedding light on the profound influence of education on the economic growth of a nation.

The study, conducted amidst the throes of the country’s democratisation process, presents a compelling case for the importance of a leader’s education in shaping local policies and growth.

The research zeroes in on the performance of newly elected mayors, contrasting those with a college education against their counterparts who lack such credentials.

The findings are as stark as they are significant.

Districts helmed by mayors without a college degree witnessed a 5 percent drop in employment.

In contrast, those under the stewardship of college-educated mayors maintained a steady employment rate.

This divergence in outcomes is not confined to employment alone.

The study also uncovers a troubling trend among the non-college educated mayors: a propensity to raise taxes while simultaneously providing less infrastructure.

This counterintuitive approach to governance not only burdens the populace but also stymies the development of essential public services.

Moreover, these mayors, bereft of a college education, were found to allocate less funding to social programs.

This lack of investment in the social fabric of their communities could have far-reaching implications, potentially exacerbating inequality and stifling social mobility.

Perhaps most disconcerting is the correlation between a lack of higher education and a higher incidence of involvement in corruption cases.

This troubling association raises questions about the integrity of leadership and the potential misuse of public funds.

The study’s findings underscore the critical role of education in shaping a leader’s approach to governance and, by extension, the economic trajectory of their jurisdiction.

It serves as a stark reminder that the power of the parchment extends far beyond the individual, influencing the prosperity of entire communities.

In the context of Indonesia’s ongoing democratization process, these findings are particularly salient.

They highlight the importance of electing educated leaders capable of fostering sustainable economic growth and maintaining the public’s trust.

As the nation continues to navigate the choppy waters of democratization, the study’s conclusions offer a valuable compass.

It suggests that the path to prosperity may well be paved with the diplomas of its leaders.

The power of the parchment, it seems, is not to be underestimated.

Research paper: Paella, P & Poelhekke, S., 2023, Democratization, Leader Education and Growth: Firm-level Evidence from Indonesia, Journal of Economic Growth

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