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Empirical Analysis on Public Expenditure for Education and Economic Growth: Evidence from Indonesia

Author

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  • Agung Suwandaru

    (School of Business, Bankstown Campus, Western Sydney University, Milperra, NSW 2214, Australia)

  • Thamer Alghamdi

    (School of Business, Parramata City Campus, Western Sydney University, Parramata, NSW 2150, Australia)

  • Nurwanto Nurwanto

    (School of Education, Western Sydney University, Penrith, NSW 2751, Australia
    Department of Islamic Education, Universitas Muhammadiyah Yogyakarta, Bantul 55183, Indonesia)

Abstract

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.

Suggested Citation

  • Agung Suwandaru & Thamer Alghamdi & Nurwanto Nurwanto, 2021. "Empirical Analysis on Public Expenditure for Education and Economic Growth: Evidence from Indonesia," Economies, MDPI, vol. 9(4), pages 1-13, October.
  • Handle: RePEc:gam:jecomi:v:9:y:2021:i:4:p:146-:d:652358
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    References listed on IDEAS

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    Cited by:

    1. Besime Fekri Ziberi & Donat Rexha & Xhemazie Ibraimi & Besnik Avdiaj, 2022. "Empirical Analysis of the Impact of Education on Economic Growth," Economies, MDPI, vol. 10(4), pages 1-10, April.
    2. Roldán Villela & Juan Jacobo Paredes, 2022. "Empirical Analysis on Public Expenditure for Education, Human Capital and Economic Growth: Evidence from Honduras," Economies, MDPI, vol. 10(10), pages 1-13, October.

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