How much teachers know and how much it matters in class: analyzing three rounds of subject-specific test score data of Indonesian students and teachers

Improving the quality of education is one of today's main challenges for governments in the developing world. Based on a unique matched student-to-teacher panel data set on test scores this paper presents two empirical results for Indonesia. First, through detailed inspection of teacher-level responses to test questions, the paper concludes that subject matter knowledge of primary school teachers in Indonesia is low on average and that a 1.0, but also a 2.0 standard deviation increase in teachers' subject matter knowledge seem to be achievable medium-term goals for education policy making in Indonesia. Second, the paper presents the results of three types of value-added regressions, a (standard) level specification, a school fixed-effects specification, and a flexible student-teacher fixed-effects specification. The student-teacher fixed-effects approach estimates the parameters of a value-added model using test score variation within each student-teacher pair across three different subjects, mathematics, science and Indonesian language. The results suggest that a 1.0 (and 2.0) standard deviation increase in teachers' subject matter knowledge across-the-board can yield increases in student achievement by 0.25 (and 0.50) student-level standard deviations by the time students complete the six-year primary school cycle.