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The Impact of Human Capital on Shadow Economy in Indonesia

Author

Listed:
  • Saraswati

    (BPS-Statistics Indonesia)

  • Neli Agustina

    (Politeknik Statistika STIS)

Abstract

Shadow economy is a market for legal and illegal goods and services that escape recording and estimation of GDP. It can cause inaccurate estimation of GDP, declining tax revenue, and less precise economic policies. Improving the quality of human capital, both in education and health dimensions, can reduce shadow economy. The research aims to estimate shadow economy and analyze the influence of the quality of human capital on shadow economy in Indonesia. Applying time series multiple linear regression analysis, the findings show that the average shadow economy in Indonesia is 28.97 percent, changes in life expectancy negatively affect changes in shadow economy, while changes in the gross participation rate of tertiary education have a positive effect.

Suggested Citation

  • Saraswati & Neli Agustina, 2020. "The Impact of Human Capital on Shadow Economy in Indonesia," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 66, pages 11-24, Juni.
    • Handle: RePEc:lpe:efijnl:202002
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    More about this item

    Keywords

    shadow economy; government expenditure; the quality of human capital; multiple linear regression; time series;
    All these keywords.

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models

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