Efficiency of Indonesian Government Education Spending: A Stochastic Frontier Analysis Approach

Objective: Education serves as a foundation of human development and a key driver of national competitiveness, with community outcomes significantly shaped by the allocation and efficiency of government education expenditure. Design/Methods/Approach: This study evaluates the effectiveness and efficiency of government education spending in relation to educational outcomes. Using panel data from 34 provinces in Indonesia for the period 2016–2023, sourced from the Indonesian Central Bureau of Statistics and the Ministry of Finance, the analysis applied the Stochastic Frontier Analysis framework with the Maximum Likelihood Estimation approach. Findings: Government spending on education positively and significantly affects educational outcomes, with an average technical efficiency score of 0.8365. Furthermore, per capita GRDP, poverty levels, and the population growth rate are also found to positively influence educational outcomes in Indonesia. Originality/Value: This study uniquely applies Stochastic Frontier Analysis to provincial-level data, filling gaps left by previous correlation-based research. Using SFA provides a deeper understanding of efficiency variations across provinces, offering insights that extend beyond simple correlations.Practical/Policy implication: The findings of this study have significant implications for Indonesian education policy. Government spending on education demonstrates a positive impact on educational outcomes, emphasizing the need for more efficient and equitable budget allocation across regions. With a technical efficiency level of 83.65 percent, there remains a 16.35 percent margin for improvement to achieve optimal resource utilization. Policymakers should strengthen fiscal governance by enhancing transparency, accountability, and adopting performance-based allocation mechanisms. Stronger coordination between central and local governments, supported by the integration of technology in planning and monitoring processes, can further improve efficiency and reduce regional disparities. Overall, education expenditure should be directed not only toward achieving technical efficiency but also toward ensuring equitable educational outcomes that strengthen human capital development and national competitiveness.