Education Inequality, Economic Growth, and Income Inequality: Evidence from Indonesia, 1996-2005

Abstract

This paper examines the determinants of economic growth, income inequality, and their relationship in the context of education inequality. The econometrics indicate that a higher level of human capital and the relative dispersion of human capital have a disequalizing relationship with income distribution. This study also indicates that economic growth has a significantly equalizing link with income distribution. In addition, the current level of inequality and growth is positively associated with the previous level of inequality and growth. Finally, human capital investment is positively related with the growth of economy. However, there is little convincing evidence that changes in inequality aspects and life expectancy have a link with economic growth and that alteration in total fertility rate has a relationship with income distribution. Therefore, in a bid to achieve egalitarian society with a more equitable distribution of income, economic policies should be targeted not only more at education but also more equal access to education.

Keywords: Education, Growth, Inequality, Indonesia

JEL Classification: I30, I21, O40