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Human Capital, Income Inequality and Economic Variables: A Panel Data Estimation from a Region in Indonesia KCI 등재 SCOPUS
- 언어ENG
- URLhttps://db.koreascholar.com/Article/Detail/399976
This paper examines how human capital and other economic variables, such as private investment, economic growth, government investment, inflation, and unemployment influence inequality in Indonesia’s provinces. We apply panel data model with fixed effect estimation for the data of 34 provinces from the period 2013 to 2019. We develop a new index for human capital using the education index approach. The results show that human capital has a negative and significant effect on income inequality. An increase in human capital is related to an increase in knowledge and competence due to the longer average school year and expectations of the school year. Human capital has increased the possibility of a person being accepted into the job market and earning a higher income; hence, it lowers income inequality. We also find that inflation leads to a higher gap of income distribution. A further implication of this situation is that the rise in inflation causes an increase in low-income people, and as a consequence, makes their lives worse off. This paper will be beneficial for policy-makers for whom human capital, which is measured using an education index, is an important factor that significantly affects income inequality, in addition to other economic factors.
1. Introduction
2. Literature Review
3. Data and Methodology
3.1. Data
3.2. Econometrics Methodology
4. Empirical Results
4.1. Descriptive Statistics
4.2. Result of Chow and Hausman Tests
4.3. Result of Classical Assumption and NormalityTests
4.4. Result of Fixed Effect Model
5. Discussion
6. Conclusion and Recommendation
References
