Lastly, the education policy literature reports the importance of community support in sustaining reform efforts. In particular, support from local stakeholders is a strong positive predictor of successful institutionalization of school reforms (Bryk et al. 2010).

This paper considers each of these factors together rather than individually. As such, it contributes not only to the literature on sustainability of development projects but also offers operational lessons for project designers. We leverage rich panel data on playgroups in rural Indonesia to demonstrate how characteristics of the playgroups during the funded project period predict their sustainability several years after donor funding ends. This is an improvement from existing research on sustainability in health and education, which typically uses cross-sectional data (Scheirer and Dearing 2011). While the focus of this paper is on the sustainability of services established under an early childhood education project, the findings also provide lessons and insights for designing other types of community-based development projects.

We present six key findings in this paper. First, we show that the vast majority (86%) of playgroups established under the project remained open three years after project funding ended. In particular, those that remained open balanced the reduction in donor funding by introducing student fees. Both our survey data and qualitative interview data show that the playgroups that closed were those that struggled to find the financial and human resources needed to continue operating.

Second, we show that the playgroups that allocated a larger share of expenditure to teacher salaries during the project period were significantly more likely to remain in operation after the project ended. We find evidence that playgroups reallocated their resources towards teacher salaries by cutting down on supplementary services such as weekly food programs.

Third, we find that the quality of the project playgroups – as measured by direct observation of the playgroup – is a key predictor of sustainability. We find that such observations capture elements of the quality of these playgroups that are predictive of sustainability, over and above what can be predicted from teachers’ education and teaching experiences alone.

Fourth, we argue that the presence of substitutes and complements in the market matters. We find that the number of kindergartens per 100 children (a complementary service, for an older age group) supports playgroup sustainability. In contrast, while the number of playgroups per 100 children (a substitute service) is negatively correlated with sustainability, the point estimates are not statistically significant. We do not find that distance to the village center or to the nearest neighboring playgroup were predictive of sustainability in our setting.

Fifth, the data suggest that support for early childhood education in the local community is important for sustainability. We find that the degree of parental involvement in the playgroups is a predictor of sustainability.

Finally, when we jointly examine the categories of predictors (finance, quality, market conditions, supplementary services, and community support), finance, local market conditions and supplementary services come out as significant predictors. Local market condition is the strongest predictor category of a center remaining open three years after the project ended. For higher degrees of sustainability, the provision of supplementary services is the strongest predictor category.

The paper proceeds as follows. Section II describes the Indonesia Early Childhood Education and Development Project. Section III introduces the data and presents descriptive statistics. The empirical strategy is described in section IV. Section V presents the regression 3