Human Capital Investment and Retirement Investments in Indonesia

English

Abstract

We investigate whether income-inducing human capital investment also impacts awareness of the importance of pension
investment by using the Family Panel Study of sampling and applying trend and difference score matching to examine this study's causal
effects. This study used random sampling of 325 families in Jakarta and Bandung. We divided into three groups, namely middle to lowerincome, which we define as families having income below the regional minimum wage, medium, which we define as families with a
payment equal to the regional minimum salary up to 50% more than regional minimum wage, and the third group of upper-middle-income
groups with incomes more than 50% above the regional minimum wage. The results show that awareness of the importance of inves ting in
pensions for old age preparation is positively related to investment in human capital in households. In particular, education spending for
children aged zero to 16 increases substantially due to the awareness of the importance of investing in human capital. The higher the level
of education in the family, especially parents, tends to encourage their children to increase human capital and be more aware of the
importance of investing in retirement preparation, which we call pension investment.