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Indonesia’S Economic Growth: Role Of Human Capital, Physical Capital, And Social Infrastructure

Author

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  • AGBOLOSOO John Atsu

    (Department of Agricultural Economics, Faculty of Economics & Management, Institut Pertanian Bogor (IPB) University, Indonesia)

  • SEPTYA Fanny

    (Department of Agribusiness, Faculty of Agriculture, Riau University, Indonesia; Department of Agricultural Economics, Faculty of Economics & Management, Institut Pertanian Bogor (IPB) University, Indonesia)

  • HUTAGOAL Manuntun Parulian

    (Department of Agricultural Economics, Faculty of Economics & Management, Institut Pertanian Bogor (IPB) University, Indonesia)

Abstract

Indonesia’s economic prosperity is measured by its growth, a key United Nations Sustainable Development Goal (SDG 8). Despite funding increases, education and healthcare gaps impede workforce development and economic progress. Inadequate social infrastructure reduces production efficiency. Limited research exists on the impact of human capital, physical capital, and social infrastructure on Indonesia’s growth. This research examines these factors and technological progress on GDP using an endogenous growth framework. The study examines physical capital’s contribution, assesses human capital’s impact, analyzes social infrastructure’s effect, and explores their interplay in growth. It analyzed 54 years of data from 1970 to 2023, focusing on GDP per capita, physical capital, labor, human capital, technological progress, and social infrastructure. Data came from World Bank Development Indicators and Penn World Table 10.1. Researchers converted data to logarithmic scales and analyzed them using EViews 12. Ordinary least squares estimation examined macroeconomic indicators. Augmented Dickey-Fuller and Philips-Perron tests checked variable stationarity. Johansen cointegration results showed cointegration between variables, with lag order 2 as optimal. Findings revealed that physical capital, labor, and human capital positively affected output, while social infrastructure negatively impacted output due to resource misallocation. Technological advancement has no effect. The Theil coefficient of 0.003355 indicated outstanding performance, while SMAPE showed 49.35% average prediction error. The study concluded that capital, labor, human capital, and social infrastructure influence growth. Addressing corruption, disparities, and infrastructure gaps between rural and urban regions is essential. Implementing governance reform, fair investment, innovative financing, and community involvement will help realize the social infrastructure’s potential for growth.

Suggested Citation

  • AGBOLOSOO John Atsu & SEPTYA Fanny & HUTAGOAL Manuntun Parulian, 2025. "Indonesia’S Economic Growth: Role Of Human Capital, Physical Capital, And Social Infrastructure," Management of Sustainable Development, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 17(1), pages 147-161, June.
    • Handle: RePEc:blg:msudev:v:17:y:2025:i:1:p:147-161:n:8
    DOI: https://doi.org/10.54989/msd-2025-0008
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