When Will Human Capital in Indonesia be Equal? A Convergence Analysis

Abstract

One of the problems faced by developing countries is income inequality, which is caused by weak and uneven human capital between regions. This research aims to determine the convergence of human capital in absolute and conditional with the explanatory variable of government expenditure in education. The method used is panel data regression with generalized least square and robust standard error. The results showed that provinces in Indonesia experienced human capital convergence in absolute, where inequality of human capital among provinces tended to decline over time and towards equity. The results also showed that provinces in Indonesia experienced human capital convergence in conditional, where government expenditure in education was able to accelerate the convergence process, but not significantly. This study also found that the time needed to equalize human capital in Indonesia is 164 years.

The more the merrier the wealthier? Multi-dimensional taxonomy of demography and development in Indonesia

“…Similar tone of research in the context of Indonesia can be found in Pratomo et al (2020) which reviews some issues related to the potential growing number of middle-class segment in Indonesia, related to education, youth unemployment, entrepreneurship, digital competitiveness and urbanisation. Another research by Wicesa and Muara Setyanti (2021) calculates the time needed to equalise human capital in Indonesia, that is, 164 years which reflects intense human development problems caused by weak and uneven human capital between regions. One among many solutions is proposed by Qurniawan and Jasmina (2021), who argue that policies to improve school quality, especially vocational high schools, should be enhanced to ensure quality human capital.…”