Empirical analysis on public expenditure for education and economic growth: Evidence from Indonesia

Empirical analysis on public expenditure for education and economic growth: Evidence from Indonesia

The purpose of this paper is to find the relationship between public expenditure in the educational sector and the economic growth in Indonesia since the government decided to spend 20% of the state budget on education. We used time series data from 1988 to 2018 and the Cobb-Douglas production funct...

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Bibliographic Details
Published in:Economies 2021-12, Vol.9 (4), p.1-13
Main Authors: Suwandaru, Agung, Alghamdi, Thamer, Nurwanto, Nurwanto
Format: Article
Language:eng
Subjects:
Access to education
Capital stock
Economic development
Economic growth
education
Education expenses
Expenditures
GDP
Government spending
Gross Domestic Product
Growth models
Higher education
Human capital
Innovations
Investments
Literature reviews
Production functions
public expenditure
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Summary:The purpose of this paper is to find the relationship between public expenditure in the educational sector and the economic growth in Indonesia since the government decided to spend 20% of the state budget on education. We used time series data from 1988 to 2018 and the Cobb-Douglas production function as an economic theory for measurement. In the methodology, we employed Autoregressive Distributed Lag bound tests to find the relationship between variables. The results show that public expenditure on education has an insignificant relationship in the long- and short-term estimation. However, they both have different directions, which is a positive relationship in long-term and a negative relationship in short-term estimation. Meanwhile, gross fixed capital formation shows a positive relationship, and the labour variable has a negative relationship in the short and long terms. In conclusion, the Indonesian government should manage the education system regarding the relationship between education expenditure and economic growth.
ISSN:2227-7099
2227-7099