Dynamics of return on investment for highly educated workers

This study aims to analyse the dynamics of the return on investment of higher education in Indonesia, by using cross section data of Indonesian Family Life Survey (IFLS) in 2000, 2007 and 2014 on the labour force aged 15–64 years. This study uses the Two Step Heckman method which calculates the probability of participation work with the Probit model to derive an inverse Mills ratio and then estimates earnings using the Mincerian Earning Function model with the inverse Mills ratio as one of the independent variables. The analysis shows that the rate of return in the investment of diploma is higher than S1/S2/S3 (undergraduate/graduate programmes). After being compared with the level of interest rates in 2000, 2007 and 2014, the investment in diploma is more profitable than the investment in S1/S2/S3. Thus, compared with the diploma level, in its development the S1/S2/S3 level shows that it has a higher rate of return to education than the diploma level as work experience increases.