THE ROLE OF INFORMATION TECHNOLOGY AND HUMAN CAPITAL ON ECONOMIC GROWTH IN INDONESIA

Abstract

Indonesia's economic growth in the digital era faces strategic challenges, one of which is the imbalance in contributions between technology investment and the standard of human capital. This research intends to investigate the impact of information technology and human capital on economic growth in 34 Indonesian provinces in the period 2018–2023. The main issue raised is the unclear extent to which technology and education (human capital) are empirically capable of driving sustainable economic growth. Data were analyzed using panel data regression methods, with the optimal framework chosen via the Chow, Hausman, and Lagrange Multiplier tests. The findings indicate that information technology exerts a notable impact on economic development, while human capital, as measured by average years of schooling, has no significant effect. These findings indicate that mastery of digital technology is more relevant in driving economic growth than the duration of formal education alone. Therefore, educational reforms are needed that are more adaptive to technological developments and industrial needs to generate inclusive and sustainable economic growth. These results highlight the urgency for Indonesia to strengthen digital skills, innovation capacity, and workforce adaptability to sustain long-term competitiveness.