The Role Of The Human Development Index on Regional Economic Growth in Java and Sumatra, 2014–2023
Keywords:
Human Development Index, Economic Growth, Panel DataAbstract
Economic growth is the main indicator in measuring the progress and welfare of a region. In the perspective of modern development, economic growth is not only determined by physical factors such as investment and capital, but also by the quality of human resources reflected through the Human Development Index (HDI). This study aims to analyze the effect of HDI on economic growth in the provinces of Java and Sumatra during the period 2014–2023. The data used are panel data from 16 provinces (6 in Java and 10 in Sumatra) with the Fixed Effect Model (FEM) approach selected based on the results of the Chow and Hausman test. The results show that HDI has a positive and significant effect on economic growth, with a coefficient value of β = 1.161 and a t-statistic value of 9.206 > t-table 1.658 and a probability value of 0.0000 < 0.05. The elasticity value E > 1 indicates that an increase in HDI is elastic to economic growth, meaning that each increase in HDI will increase economic growth proportionally greater. These results reinforce the human capital theory, which states that investment in education, health, and a decent standard of living is key to sustainable economic growth. The study also found that the HDI's influence on economic growth was stronger in Java than in Sumatra due to differences in education quality, infrastructure, and urbanization. The policy implications of this study are the need for local governments to strengthen investment in vocational education, workforce training, and improving basic health services to reduce disparities in human development between regions.
References
Bank, W. W. (2022). World development report 2022: finance for an equitable recovery. World Bank Publications.
Barro, R. J. (2013). Education and economic growth. Annals of Economics and Finance, 14(2), 301–328.
Becker, G. S. (1975). Human capital: A theoretical and empirical analysis. National Bureau of Economic Research.
Bekele, M., Sassi, M., Jemal, K., & Ahmed, B. (2024). Human capital development and economic sustainability linkage in Sub-Saharan African countries: Novel evidence from augmented mean group approach. Heliyon, 10(2).
Boateng, E., Agbola, F. W., & Mahmood, A. (2021). Foreign aid volatility and economic growth in Sub-Saharan Africa: Does institutional quality matter? Economic Modelling, 96, 111–127.
Borensztein, E., De Gregorio, J., & Lee, J.-W. (1998). How does foreign direct investment affect economic growth? Journal of International Economics, 45(1), 115–135.
Brodny, J., & Tutak, M. (2024). A multi-criteria measurement and assessment of human capital development in EU-27 countries: A 10-year perspective. Journal of Open Innovation: Technology, Market, and Complexity, 10(4), 100394.
Del-Aguila-Arcentales, S., Alvarez-Risco, A., Jaramillo-Arévalo, M., De-la-Cruz-Diaz, M., & de las Mercedes Anderson-Seminario, M. (2022). Influence of social, environmental and economic sustainable development goals (SDGs) over continuation of entrepreneurship and competitiveness. Journal of Open Innovation: Technology, Market, and Complexity, 8(2), 73.
Deng, Y., Li, C., Wang, S., & Tang, R. (2025). The impact of economic openness on common prosperity: Insights from provincial panel data. International Review of Economics & Finance, 98, 103908.
Dollar, D., Kleineberg, T., & Kraay, A. (2015). Growth, inequality and social welfare: cross-country evidence. Economic Policy, 30(82), 335–377.
Dollar, D., & Kraay, A. (2002). Growth is Good for the Poor. Journal of Economic Growth, 7(3), 195–225.
Ghosh, M. (2006). Economic growth and human development in Indian states. Economic and Political Weekly, 3321–3329.
Gyimah-Brempong, K., Paddison, O., & Mitiku, W. (2006). Higher education and economic growth in Africa. The Journal of Development Studies, 42(3), 509–529.
Lucas Jr, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3–42.
Mankiw, N. G., Romer, D., & Weil, D. N. (1992). A contribution to the empirics of economic growth. The Quarterly Journal of Economics, 107(2), 407–437.
Nindi, A. G., & Odhiambo, N. M. (2015). Poverty and economic growth in Swaziland: An empirical investigation. Managing Global Transitions, 13(1), 59.
Pérez-Trujillo, M., & Lacalle-Calderón, M. (2020). The impact of knowledge diffusion on economic growth across countries. World Development, 132, 104995.
Petrakis, P. E., & Stamatakis, D. (2002). Growth and educational levels: a comparative analysis. Economics of Education Review, 21(5), 513–521.
Piwowar-Sulej, K., Malik, S., Shobande, O. A., Singh, S., & Dagar, V. (2023). A contribution to sustainable human resource development in the era of the COVID-19 pandemic. Journal of Business Ethics, 1.
Progress, S. H. (2014). Human development report 2014. United Nations Development Programme: Geneva, Switzerland.
Ranis, G., Stewart, F., & Ramirez, A. (2000). Economic growth and human development. World Development, 28(2), 197–219.
Ravallion, M., & Chen, S. (2003). Measuring pro-poor growth. Economics Letters, 78(1), 93–99.
Romer, P. M. (1990). Endogenous technological change. Journal of Political Economy, 98(5, Part 2), S71–S102.
Saleh, H., Surya, B., Annisa Ahmad, D. N., & Manda, D. (2020). The role of natural and human resources on economic growth and regional development: With discussion of open innovation dynamics. Journal of Open Innovation: Technology, Market, and Complexity, 6(4), 103.
Saqib, N., Ozturk, I., Usman, M., Sharif, A., & Razzaq, A. (2023). Pollution haven or halo? How European countries leverage FDI, energy, and human capital to alleviate their ecological footprint. Gondwana Research, 116, 136–148.
Shahzad, M., Qu, Y., Rehman, S. U., & Zafar, A. U. (2022). Adoption of green innovation technology to accelerate sustainable development among manufacturing industry. Journal of Innovation & Knowledge, 7(4), 100231.
Todaro, M. P., & Smith, S. C. (2000). Economic Development 7th. Harlow: Addison-Wesley.
Zhao, Y., Li, J., Liu, K., & Shang, C. (2024). Impact of urban-rural development and its industrial elements on regional economic growth: An analysis based on provincial panel data in China. Heliyon, 10(16).
