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 econometric results from a cross-section analysis of 23 provinces in the period of 1996-2005 indicate that a higher level of human capital and the relative dispersion of human capital have a disequalizing effect on the income distribution. It also confirms that economic growth has strongly and significantly equalizing effect on the income distribution, supporting the complementarity relationship between equity and growth. In addition, human capital investment contributes significantly to the growth of economy. Therefore, in a bid to achieve egalitarian society with a more equitable distribution of income, economic policies should be more targeted at not only more education but also equal access to education.