The Effect Of Physical Capital Accumulation, Human Capital And ICT Development Index On Labor Productivity In Indonesia As A Middle Income Trap Country

Atika Putri Sherlyanti; Marselina; Vitriyani Tri Purwaningsih

doi:10.63922/ijebir.v5i03.3822

Atika Putri Sherlyanti Faculty of Economics and Business, University of Lampung, Indonesia
Marselina Faculty of Economics and Business, University of Lampung, Indonesia
Vitriyani Tri Purwaningsih Faculty of Economics and Business, University of Lampung, Indonesia

DOI: https://doi.org/10.63922/ijebir.v5i03.3822

Keywords: Labor Productivity, Physical Capital, Human Capital, ICT Development Index, Middle Income Trap

Abstract

Indonesia, as an upper middle-income country, continues to face the risk of falling into the middle income trap due to relatively low labor productivity, which has slowed economic growth and hindered the country’s transition toward a developed economy. This research examines the effects of physical capital accumulation, human capital, and the Information and Communication Technology (ICT) Development Index on labor productivity across 34 provinces in Indonesia during 2019-2023. Using panel data analysis, physical capital is proxied by Gross Fixed Capital Formation (GFCF), while human capital is measured by mean years of schooling and life expectancy. The results show that GFCF, mean years of schooling, and life expectancy have positive and significant effects on labor productivity. Meanwhile, the ICT Development Index has a negative and insignificant effect, indicating that the impact of technology adoption on productivity may require a longer adjustment period and more effective utilization across regions. These findings suggest that strengthening investment and improving human capital quality are essential strategies for increasing labor productivity, enhancing economic competitiveness, and helping Indonesia escape the middle income trap.

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