ABSTRACT
In 2003, the government of Indonesia under the Law of Education System implemented a nine year basic education and a requirement of central and local governments to allocate a minimum of 20% of their budget for education. Both central and local governments have managed to allocate 20% of their budget for education in 2009. At national level, education outcomes such as net enrolment ratios have improved in the past ten years. However, several studies show that education outcomes at the district level remain an issue. On the other hand, Indonesia faces challenges of globalisation, especially in the implementation of the ASEAN Economic Community in 2016. Enhancing human resources through education is essential for Indonesia to compete in the globalised world. This paper aims to analyse the impact of government spending on education and other socio-economic factors which cause disparities of education among districts in Indonesia. Government spending on education will indeed increase the education sector. However, there is a limit on that. Other prominent factors must also be considered, so that the spending can be translated into education outcomes. The paper applies an econometric approach by employing a cross section analysis using a set of updated secondary data of districts in Indonesia during the period of 2010 to 2014.
