Analysis of Causality and Cointegration between Education-Economic Growth and Education-Poverty in Indonesia

Education is an important indicator of economic development. The objective of this study is to determine the causality and cointegration between education and economic growth, and between education and poverty. In this study, the dependent variables were divided into two parts, namely economic growth and poverty reduction. The empirical analysis is based on time series data for 20 years period from 1990 to 2010. The model tested for long run relationship using Johansen and Juselius cointegration approach shows that education, population, human development index, poverty and inflation and economic growth are cointegrated. The evidence also indicates that economic growth, population, education (primary school and junior high school) enrollment and poverty are cointegrated. In terms of causality the result shows that economic growth (GDP) granger causes on education (EDUC) enrollment, and poverty (POV) granger cause the junior high school enrollment.