Does Human Capital Spillovers Promote Economic Growth in Indonesia? (Panel Data Analysis with Gravity's Approach)

The aim of this paper was to investigate the existence and effect of human capital spillover on economic growth in Indonesia. The human capital spillover is measured using composite variable comprising of educated worker share, distance, and income per capita gap. This composite variable implies that there is a human capital interaction among regions provided gaps in the distance and income per capita. Using FEM, the result showed that capital and human capital have positive effect on the economic growth. However, the estimation fails to reflect positive effect of human capital spillover on economic growth. This implies that given higher interaction among regions the spillover of human capital has not yet been the source to promote economic growth in Indonesia.