Human Capital and FDI Effects on Regional Economic Growth: An ECM Approach

Caesar Muslim (), Anas Iswanto and F. Y. Amanus Khalifah
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Caesar Muslim: Hasanuddin University
Anas Iswanto: Hasanuddin University
F. Y. Amanus Khalifah: Hasanuddin University

A chapter in Proceedings of the 10th International Conference on Accounting, Management, and Economics (10th ICAME 2025), 2026, pp 581-593 from Springer

Abstract: Abstract The present research aims to examine the effect of human resource quality, as demonstrated by the average years of schooling (RLS), and the influence of foreign capital, quantified by Foreign Direct Investment (FDI), on economic growth in South Sulawesi Province in Indonesia. The analysis utilizes the Error Correction Model (ECM) methodology to elucidate both short-term and long-term correlations among variables. The estimation results demonstrate that RLS exerts a positive and statistically significant influence on economic growth in both the short and long term, underlining the essential role of education in increasing productivity and fostering sustainable development. In contrast, FDI shows a positive but statistically insignificant correlation in both the short and long terms, indicating that foreign capital inflows have not yet effectively contributed to regional economic expansion. These findings emphasize the necessity for development plans that focus on developing human capital and optimizing foreign direct investment through improved infrastructure, regulatory frameworks, and closer connections with productive sectors.

Keywords: Human Capital; FDI; Economic Growth; ECM; Economics (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6239-709-5_40

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DOI: 10.2991/978-94-6239-709-5_40

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