This study reexamines the return on education (ROE) in Indonesia to solve the puzzle between the high
ROE from previous studies and the low enrollment rate for higher education by taking into account
endogeneity and sample selectivity issues. This study finds the OLS estimates of ROE in between 10% and
12%. After controlling for unobserved family background using sibling data, the Household Fixed Effect
estimate indicates ROE reduces from 10.8% to 5%. This study argues ROE is not as high as previously
estimated and may explain why the enrollment rate for college has been stagnating in Indonesia.