EDUCATION ASPECT

Teori Human Capital

 Endogenous growth economists believe that improvements

in productivity can be linked to a faster pace of
innovation and extra investment in human capital.
 Endogenous growth theorists stress the need for government
and private sector institutions and markets which nurture
innovation, and provide incentives for individuals to be
inventive.
 There is also a central role for knowledge as a determinant
of economic growth.
 Endogenous growth theory predicts positive externalities
and spill-over effects from development of a high valued-
added knowledge economy which is able to develop and
maintain a competitive advantage in growth industries in the
global economy.
 The main points of the endogenous growth theory are as
follows:

 The rate of technological progress should not be

taken as a given in a growth model – appropriate
government policies can permanently raise a
country’s growth rate particularly if they lead to a
higher level of competition in markets and a higher
rate of innovation
 There are potential increasing returns from higher
levels of capital investment
 Theory emphasizes that private investment in R&D is
the central source of technical progress
 Protection of property rights and patents can provide
the incentive to engage in R&D
 Investment in human capital (education and training
of the workforce) is an essential ingredient of growth
What is Human Capital?

 The basis of human capital lies in the

theories of Theodore Schultz, an
economist at the University of
Chicago who was awarded the
Nobel Prize in economic sciences in
1979. Schultz, an agricultural
economist, produced his ideas of
human capital in the early 1960s as
a way of explaining the advantages
of investing in education to improve
agricultural output.
lanjutan

 The logical next step was to

expand this linkage between
better education and improved
productivity as a benefit for the
economy as a whole. Schultz
demonstrated that the yield on
human capital in the US
economy was larger than that
based on physical capital such
as new plant and machinery.
 lanjutan

 Gary Becker, the 1992 Nobel Prize

winner for economics, built on the idea,
explaining that expenditure on
education, training and medical care
could all be considered as investments
in human capital. "They are called
human capital," he wrote, "because
people cannot be separated from their
knowledge, skills, health or values in
the way they can be separated from
their financial and physical assets."
 Education right in Indonesia’s
Constitution
 Every person shall have the right
to develop him/herself through the
fulfillment of his/her basic needs,
the right to education and benefit
from science and technology, arts
and culture, for the purpose of
improving the quality of his/her life
and for the welfare of the human
race. (Article 28 C 1).
 Every citizen has the right to
receive education (Article 31, 1)

 Every citizen has the obligation

to undertake basic education,
and the government has the
obligation to fund this. (Article
31, 2)
Right based approach

 Equality : human right are

possessed equally by everyone.
 Indivisibility : one right cannot
take precedence over any other
 Performance standards :
involves setting numerical
targets and attempting to
monitor the achievement
Continued . . . . . . . . . . . . .

 Participation : pays close attention

not just to the fulfillment of rights but
also to the way in which they are
fulfilled
 Empowerment : there is a need to
guarantee that the rights is able to
empower the people
 Accountability : all efforts have to be
accountable for all parties
 Pathways to Human
GDP Growth Development (HDI 2004)

Income Public
distribution Social spending

Improvement in living Private spending Improvement in

Standards and On education and Health and education
Reduction in poverty health indicators

Synergy
 Why government should
finance education sector ?
 There is large externalities :
 helping to upgrade skills thus increases
incomes and social mobility;
 Education also features in the health,
nutrition and poverty nexus : a better
educated person is more aware of the
nutritional values of food, and the
importance of a healthy life style and of
hygiene. This is particularly important
for women.