Human Capital, Labour Force, And Economic Growth: Case Study of Across Regions in Indonesia

Abstract

Abstract. Introduction. Human development in education, health, and decent living increases, the accumulated human capital increases. The increase in production factors in the form of human development as a whole will increase output. In aggregate, an increase in the accumulation of human capital will impact the use of production factors as a source that replaces accumulated physical capital with human capital. Based on endogenous growth theory, human capital accumulation will create knowledge that will produce higher knowledge output. This research focuses on analyzing economic growth in Indonesia regarding endogenous factors, including the Government Expenditure Ratio for Education and Health, Human Development Index, and Labor Force Participation Rate by all provinces in Indonesia. The data used in this study are secondary for the period 2011-2020 and cross-sectional from 34 provinces in Indonesia. The analysis technique uses quantitative with Panel Data regression analysis tool. Purpose. This study analyzes the effect of the Government Expenditure Ratio on Education and Health, Human Development Index, and Labor Force Participation Rate on Economic Growth in Indonesia. Results. Education and Health Expenditure Ratio, HDI, and TPAK have a positive effect on Economic Growth. This condition means that every increase in Education and Health Expenditures, the human development index, and the Labor Force Participation Rate (TPAK) will increase economic growth. Overall economic growth is mostly determined by the Labor Force Participation Rate (TPAK). Conclusions. . Increasing the Proportion of Education and Health Expenditure Ratio, improving the quality of HDI, and increasing LFPR will impact increasing Economic Growth in Indonesia. Thus, to further increase spending on education and health, the availability of employment opportunities will result in the accumulation of human capital, which will increase economic growth in the long term.