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

Author

Listed:
  • Caesar Muslim

    (Hasanuddin University)

  • Anas Iswanto

    (Hasanuddin University)

  • F. Y. Amanus Khalifah

    (Hasanuddin University)

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.

Suggested Citation

  • Caesar Muslim & Anas Iswanto & F. Y. Amanus Khalifah, 2026. "Human Capital and FDI Effects on Regional Economic Growth: An ECM Approach," Advances in Economics, Business and Management Research,, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6239-709-5_40
    DOI: 10.2991/978-94-6239-709-5_40
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