Abstract

This paper quantifies the long-run aggregate and distributional effects of Indonesia’s Sekolah Dasar INPRES program, one of the largest school construction programs in history. I do so with a spatial equilibrium model in which students invest in education, then migrate for employment after graduation. I find that the program increased aggregate output by 8%, with large gains for rural students but small gains for rural regions. Labor market integration magnifies each effect, as education and migration are complements: access to high urban wages raises the returns to education but also encourages students to leave rural regions behind.