Abstract
This research analyzes the convergence hypothesis that applied to human capital which is one of important factor for economic development. This model applied to analyze the condition of provinces in Indonesia that have different conditions of human capital between regions for 33 provinces in Indonesia for two period between 2004 to 2010 and 2010 to 2016. This study uses data panels in estimating with fixed effects model as the best model choice. The result of the analysis for sigma convergence model is a decrease of global dispersion of human capital growth in Indonesia for the both periods. The results of beta convergence confirm the existence of absolute and conditional convergence model for the both periods. The determinants of human capital convergence in first period are economic growth, poverty, illiteracy, access to sanitation, access to clean water, number of health centers, and number of universities. Meanwhile different conditions are shown in the second period where the determinants of conditional convergence of human capital are determined only by economic growth, poverty, and sanitation access.
Highlights
Economic development provides an important emphasis on human capital because it has the accumulative and sustainable aspects
Based on the estimation results for the whole model, it can be concluded that the conditions of sigma, absolute beta, and conditional beta convergence are empirically occurring in Indonesia
This condition shows that the inequality of human capital between regions is one of the problems that occurs in Indonesia
Summary
Economic development provides an important emphasis on human capital because it has the accumulative and sustainable aspects. Investing in human capital becomes important because it will have an effect in the future (Becker, 1962) and overall economic development (Becker, 2002). The mutual relationship between economic growth and human capital growth as the important key to sustainable economic growth (Mincer, 1995). The relationship between human capital and economic growth is an interesting study in the study of economic development. Direct research that indicates the effect of human capital on economic growth (Hanushek, 2013) while the indirect conditions affect economic growth through making better of labor quality (Hanushek and Kimko, 2000). Diverse results show that empirically there is still room to explore the role of human capital in influencing the economic conditions of a country
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