<![CDATA[The purpose of this study is to investigate, using relevant robust econometric modelling, physical capital and human capital, and their impact on growth in Indonesia for policy analysis. Indonesia is already underway to the structural transformation from basic sector to industry and service sectors which requires corresponding human capital. It is very crucial to investigate which level education has been in demand for such transformation process. Therefore, the auto regressive distributed lag (ARDL) by Pesaran and Pesaran (1997) was chosen for supporting the relationship analysis using data from 1970 to 2017. The important finding for policy analysis was that human capital appeared to be a continuing factor shaping Indonesia’s growth, along with physical capital accumulation, with particularly strong effects for human capital arising from tertiary education. Physical capital has shown a strong and significant impact on the growth in the long run and indicated that Indonesia needs long term investment to generate growth. Such investment has distinctions related to sustainable operation such as infrastructure, sophisticated services, and venture capital. Consequently, it requires high skill labour supplied by tertiary education institutions. A further development of tertiary education next to enhancement of investment environment in manufacture and service sector should be set as priority programs in inducing growth.]]>
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