Economic Thought and Practice, , 2026.
Original scientific paper
https://doi.org/10.17818/EMIP/2026/31
INEQUALITY DYNAMICS IN INDONESIA: THE LONG-RUN ROLES OF HUMAN CAPITAL DEVELOPMENT AND INVESTMENT
Khusaini Khusaini
; Syekh-Yusuf Islamic University, Master of Public Administration, Indonesia
*
Bambang Mardisentosa
; Syekh-Yusuf Islamic University, Faculty of Economic and Business, Indonesia
Laksono Edhi Lukito
; Syekh-Yusuf Islamic University, Faculty of Economics and Business, Indonesia
* Corresponding author.
Abstract
Income inequality remains a major challenge in both developed and developing economies and is typically more pronounced in urban areas. This study examines the relationship between income inequality, human capital development, and investment in Tangerang Municipality in both the short and long term. Using annual data from 1995 to 2025, the study employs the ARDL–ECM and Toda–Yamamoto causality methods. The results confirm a stable long-term equilibrium relationship among the variables. Human capital development significantly reduces income inequality in both the short and long term, underscoring its role in promoting a more equitable distribution of income and supporting sustained social progress. In contrast, investment significantly increases income inequality over both periods, indicating that the benefits of capital accumulation are not evenly shared. The Toda–Yamamoto causality analysis reveals one-way causality from human capital development and investment to income inequality. These findings support policies that combine investment promotion with broader access to education and skills development for all income groups.
Keywords
ARDL; human capital; income inequality; investment
Hrčak ID:
348657
URI
Publication date:
1.7.2026.
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