Do Education Investment and Welfare of Labor Affect Productivity Growth in Indonesia?
Abstract
Increasing the education budget in Indonesia has become the focus of economic politics because it is a fundamental issue. Education, as a significant component of labor productivity, plays a vital role in driving the welfare of the workforce due to the increase in the Total Factor Productivity (TFP). This paper aims to test the quality of tertiary education by using World Bank and APO data. This paper provides an overview of tertiary education that influences TFP when juxtaposed with several other control variables and uses the ARDL (Autoregressive Distributed Lag) test. The results show that TFP growth is significantly positively affected by the improvement of tertiary education quality and production capital but is significantly affected by the welfare of the workforce. This study implies that the government must allocate an adequate budget to improve education quality in Indonesia.
How to Cite:
Aji, R. H. S., Baharin, R., Yussof, I., & Mohd Saukani, M. N. (2022). Do Education Investment and Welfare of Labor Affect Productivity Growth in Indonesia. Signifikan: Jurnal Ilmu Ekonomi, 11(2), 273-288. https://doi.org/10.15408/sjie.v11i2.26401.
Keywords
References
Aggrey, N., Eliab, L., & Joseph, S. (2010). Human Capital and Labor Productivity in East African Manufacturing Firms. Current Research Journal of Economic Theory, 2(2), 48–54.
Al Arif, M. N. R. (2014). Pengaruh Pendidikan Terhadap Pendapatan Domestik Regional Bruto. Signifikan: Jurnal Ilmu Ekonomi, 3(1), 81-94.
Ali, H., & Jabeen, A. (2015). Effects of Education on Economic Growth : Evidence from Pakistan. American Journal of Economics, Finance and Management, 1(6), 579–585.
Antarwati, S. H. B. H. & E. (2018). Produktivitas dan Pemanfaatan Bonus Demografi. In Adioetomo, S. M., & Pardede, E. L. (Ed.). Depok: Rajawali Pers.
Barro, R. J. (1991). Economic Growth in a Cross Section of Countries. The Quarterly Journal of Economics, 106(2), 407. https://doi.org/10.2307/2937943
Barro, R. J., & Lee, J.-W. (2010). A New Data Set of Educational Attainment in the World, 1950-2010. NBER Working Papers 15902.
Bils, M., & Klenow, P. J. (2000). Does Schooling Cause Growth? American Economic Review, 90(5), 1160–1183. https://doi.org/10.1257/aer.90.5.1160
Bokana, K. G., & Akinola, G. W. (2017). Productivity Effects of Higher Education Human Capital in Selected Countries of Sub-Saharan Africa. Proceedings of Rijeka Faculty of Economics: Journal of Economics and Business, 35(1), 173–198. https://doi.org/10.18045/zbefri.2017.1.173.
Caceres, L. R., & Caceres, S. (2017). Labor Productivity and Social Policy in Latin America. The Journal of Developing Areas, 51(2), 85–104.
Castello, A., & Dome, R. (2002). Human Capital Inequality and Economic Growth : Some New Evidence. The Economic Journal, 112, 187–200. https://doi.org/10.1111/1468-0297.00024.
Daude, C., & Fernández-arias, E. (2010). On the Role of Productivity and Factor Accumulation in Economic Development in Latin America and the Caribbean. IDB Working Paper Series No. IDB-WP 155.
Gherghina, R., & Duca, I. (2013). The Contribution of Education to the Economic Development Process of the States. Journal of Knowledge Management, Economics and Information Technology, 1, 88-100.
Gregorio, J. D., & Lee, J. W. (2002). Education and Income Inequality: New Evidence From Cross-Country Data. Review of Income and Wealth, (3), 395–416. https://doi.org/10.1111/1475-4991.00060.
Klenow, P. J. (2005). Externalities and Growth. In Aghion, P., & Durlauf , S. (Eds.). Handbooks of Economic Growth,. Elsevier. Netherlands. https://doi.org/10.1016/S1574-0684(05)01011-7.
Levedinski, L., & Vandenberghe, V. (2014). Assessing Education’s Contribution to Productivity Using Firm-Level Evidence. International Journal of Manpower, 35(8), 1116-1139. https://doi.org/10.1108/IJM-06-2012-0090.
Lee, J., & Lee, H. (2018). Human Capital and Income Inequality. Journal of the Asia Pacific Economy, 23(4), 554-583. https://doi.org/10.1080/13547860.2018.1515002.
Lubis, C. A. B. E. (2014). Pengaruh Jumlah Tenaga Kerja, Tingkat Pendidikan Pekerja Dan Pengeluaran Pendidikan Terhadap Pertumbuhan Ekonomi. Economia, 10(2), 187–193. https://doi.org/10.1007/s10533-015-0125-0.
Lucas, R. E. (1988). On The Mechanics of Economic Development. Journal of Monetary Economics, 22, 3–42.
Mankiw, N. G., Romer, D., & Weil, D. N. (1992). A Contribution to the Empirics of Economic Growth. The Quarterly Journal of Economics, 107(2), 407–437. https://doi.org/10.2307/2118477.
Marquez-Ramos, L., & Mourelle, E. (2019). Education and Economic Growth: An Empirical Analysis of Nonliniearitas. Applied Economic Analysis, 27(79), 21-45. https://doi.org/10.1108/AEA-06-2019-0005.
Mat, K. M. and R. M. (2015). The Relationship between Human Capital Investment and Economic Development in Sabah. Malaysian Journal of Business, 2(1), 83–107.
Mate, D. (2015). Impact of Human Capital on Productivity Growth in Different Labour-Skilled Branches. Acta Oeconomica, 65(1), 51-67.
Mcmillan, M. S. (2011). Globalization, Structural Change and Productivity Growth. In NBER Working Paper Series No. 17143. https://doi.org/10.3386/w17143.
Moretti, E. (2004). Estimating the Social Return to Higher Education: Evidence from Longitudinal and Repeated Cross-sectional Data. Journal of Econometrics, 121, 175–212. https://doi.org/10.1016/j.jeconom.2003.10.015
Nafziger, E. W. (2012). Economic Develpoment. Cambridge University Press. Cambridge.
Prabowo, B. P. S. (2015). Gambaran Umum Ketimpangan Pendapatan di Indonesia dalam Persiapan Menuju Masyarakat Ekonomi Asean 2015. Journal of Research in Economic and Management, 15(1), 182–189.
Qu, Y., & Cai, F. (2011). Understanding China’s Workforce Competitiveness: a Macro Analysis. Journal of Chinese Human Resource Management, 2(1), 8-22. https://doi.org/10.1108/20408001111148702.
Qutb, R. (2017). How Education Does at All Levels Influence Total Factors Productivity Growth? International Research Journal of Finance and Economics, 159, 58-75.
Reza, F., & Widodo, T. (2013). The Impact of Education on Economic Growth in Indonesia. Journal of Indonesian Economy and Business, 28(1), 23-44. https://doi.org/10.22146/jieb.6228.
Setyonaluri, D., & Amanulah, A. (2018). Memetik Bonus Demografi, Membangun Manusia Sejak Dini. Rajawali Pers. Depok.
Shin, Y., Smith, R. J., & Pesaran, M. H. (2001). Bounds Testing Approaches to The Analysis of Level Relationships. Journal of Applied Econometrics, 326, 289–326. https://doi.org/10.1002/jae.616.
Solow, R. M. (1956). A Contribution to the Theory of Economic Growth Author. Oxford Journal, 70(1), 65–94.
Todaro, M. P., & Smith, S. C. (2009). Pembangunan Ekonomi. Erlangga. Jakarta.
Van Zanden, J. L., & Marks, D. (2012). Ekonomi Indonesia 1800-2010 Antara Drama dan Keajaiban Pertumbuhan. Kompas. Jakarta.
Van Lottum, J., & Van Zanden, J. L. (2014). Labour Productivity and Human Capital in the European Maritime Sector of the Eigteenth Century. Explorations in Economic History, 53, 83-100. https://doi.org/10.1016/j.eeh.2014.04.001.
Wantchekon, L., Klašnja, M., & Novta, N. (2015). Education and Human Capital Externalities: Evidence from Colonial Benin. The Quarterly Journal of Economics, 130(2), 703-757. https://doi.org/10.1093/qje/qjv004.
Wei, Z., & Hao, R. (2011). The Role of Human Capital in China’s Total Factor Productivity Growth: a Cross-Province Analysis. The Development Economies, 49(1), 1–35. https://doi.org/10.1111/j.1746-1049.2010.00120.x.
Wicaksono, T. Y., & Witoelar, F. (2018). Early Experience and Later Outcome of Education: Schooling Transition Evidence from Indonesia. Bulletin of Indonesian Economic Studies, 55(1), 29-60. https://doi.org/10.1080/00074918.2018.1439156.
Woessmann, L. (2016). The Economic Case for Education. Education Economics, 24(1), 3–32. https://doi.org/10.1080/09645292.2015.1059801.
Yussof, I., & Zakariya, Z. (2009). Pertumbuhan Ekonomi dan Keperluan Pendidikan Tinggi di Malaysia. Jurnal Ekonomi Malaysia, 43, 85-105.
Ziberi, B. F., Rexha, D., Ibraimi, X., & Avdiaj, B. (2022). Empirical Analysis of the Impact of Education on Economic Growth. Economies, 10, 89. https://doi.org/10.3390/economies10040089.
DOI: 10.15408/sjie.v11i2.26401
Refbacks
- There are currently no refbacks.
