OPTIMIZING HUMAN CAPITAL CAPACITY TO DRIVE GROWTH ABOVE 5%

Yoga Affandi, Donni Fajar Anugrah, Cicilia Anggadewi Harun, Mohammad Marza Naufal, Jessica Tasijawa and Pandu Kuntoadji
Additional contact information
Yoga Affandi: Bank Indonesia
Donni Fajar Anugrah: Bank Indonesia
Cicilia Anggadewi Harun: Bank Indonesia
Mohammad Marza Naufal: Bank Indonesia
Jessica Tasijawa: Bank Indonesia
Pandu Kuntoadji: Bank Indonesia

No WP/04/2024, Working Papers from Bank Indonesia

Abstract: This study explores strategies for optimizing human capital to drive Indonesia's economic growth above 5%. Low labor productivity and disparities in education quality between regions are the main obstacles to achieving higher growth. The results of the panel data analysis show that increasing human capital significantly increases economic growth, especially in sectors that require high skills, such as health and manufacturing. Increasing human capital accelerates technological innovation, where skilled workers can adopt and develop new technologies that drive efficiency and competitiveness. On the other hand, there are fundamental problems in the education system, such as frequent curriculum changes, uneven teacher quality, and bullying in schools, which hinder human capital development. In addition, the increase in human capital is still concentrated in Java, while other regions need to catch up in access and quality of education, which causes inequality. Therefore, close collaboration between the government and the private sector is needed to improve the quality of education and ensure the development of human capital evenly across regions so that its impact can be optimized to drive more inclusive and sustainable economic growth.

Keywords: Education and Economic Development; Human Capital; Migration (search for similar items in EconPapers)
JEL-codes: I25 J24 O15 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2024
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