Economics & Sociology

ISSN: 2071-789X eISSN: 2306-3459 DOI: 10.14254/2071-789X
Index PUBMS: f5512f57-a601-11e7-8f0e-080027f4daa0
Article information
Title: Do Education Levels Matter on Indonesian Economic Growth?
Issue: Vol. 11, No 3, 2018
Published date: 09-2018 (print) / 09-2018 (online)
Journal: Economics & Sociology
ISSN: 2071-789X, eISSN: 2306-3459
Authors: David Mendy
Faculty of Economics and Business, Gadjah Mada University

Tri Widodo
Center for Southeast Asian Social Studies (CESASS), and Faculty of Economics and Business, Gadjah Mada University
Keywords: education levels, economic growth, ARDL, Indonesia
DOI: 10.14254/2071-789X.2018/11-3/8
Index PUBMS: 5d4b8cce-cdf6-11e8-92b1-901b0efa6e97
Language: English
Pages: 133-146 (14)
JEL classification: O15, O24

Arising from the questions “Would all types of human capital affect economic growth identically? And which type of schooling - primary, secondary, or tertiary – should public policy promote?”, this study examines the nexus between different educational levels and Indonesia’s economic growth over a reference period 1984-2014. During this period, education expansion took place at all three levels of education reflecting structural changes tied within the policies under the Millennium Development Goals (MDG’s) as the key and powerful factor for sustainable economic development. The study applies the augmented Lucas endogenous growth model and employs the autoregressive distributed lag model. The empirical analysis reveals a long-run relation between education and economic growth. The estimated long-run and short-run elasticity of different education levels reveal that, overall, human capital structure in Indonesia is still at the stage of promoting economic growth and identifies tertiary education as the main level for development. The findings reveal that education level matters to economic growth. Further, the empirical evidence helps shed light on why empirical studies have failed to find a significant relationship between schooling and economic growth.


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