The Long Shadow: Childhood Poverty and the Returns to Education

Ade Febriady, Agnieszka Postepska and Viola Angelini

No 1731, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: This study documents substantial heterogeneity in returns to education by childhood poverty status among Indonesian wage workers aged 15-35. Individuals who grew up poor earn only 1.5 percent per additional year of schooling-less than onefourth of the 6.8 percent earned by those who were never poor. We estimate these returns using a control-function approach that exploits conditional heteroskedasticity for identification in the absence of exclusion restrictions. The control-function coefficient is three times larger among the poor, indicating markedly stronger positive selection into schooling in this group: only individuals with exceptionally favorable unobserved characteristics attain higher levels of education. We also present descriptive evidence of lower skill accumulation per year of schooling and more limited access to high-paying jobs among disadvantaged individuals, patterns consistent with lower marginal returns. These findings highlight the limited equalizing role of education, measured here by years of schooling.

Keywords: Returns to Education; Childhood Poverty; Control-Function Approach (search for similar items in EconPapers)
JEL-codes: I24 I26 I3 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:glodps:1731

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