The Relationship between Human Capital and International Trade on the Dynamics of Poverty and Economic Growth in Indonesia

Abstract

This research explores the influence of human capital and international trade on poverty levels and economic growth in Indonesia, using data from the World Bank covering the period from 2001 to 2020. The variables used include education and health as representations of human capital and exports and imports as representations of international trade, poverty, and economic growth. The analysis used the vector autoregressive model (VECM) to examine these variables' relationships. The research results show that improving the quality of human capital positively contributes to economic growth, with education and health having a significant impact. Education also proves to enhance international trade through exports and imports, but it also has a negative impact on poverty. Additionally, exports have a significant negative impact on poverty and a significant positive impact on economic growth. These findings support the hypothesis that increasing human capital and international trade reduces poverty and economic growth in Indonesia. Therefore, policymakers must develop investment strategies in human capital and balance international trade to achieve sustainable economic growth and reduce poverty