Assessing the Role of Education and Health Sector Development in Driving Economic Growth and Community Welfare: Evidence from Berau Regency Indonesia

Objective: This study aims to investigate the roles of education and health sector development in driving economic growth and enhancing community welfare in Berau Regency, Indonesia, with the goal of identifying sectoral contributions and their mediated pathways through economic expansion. Theoretical Framework: The research is grounded in Human Capital Theory and Endogenous Growth Theory, which posit that investments in education and health enhance individual productivity, stimulate innovation, and drive sustained economic growth and welfare improvements. Method: Employing a quantitative explanatory approach, the study utilized Structural Equation Modeling (SEM) to analyze data from structured surveys and official statistics across all sub-districts in Berau Regency for the period 2015–2024. Variables included education indicators, health infrastructure and workforce measures, economic growth contributions, and community welfare outcomes. Results and Discussion: Results reveal that education positively and significantly influences both economic growth and community welfare, with economic growth fully mediating the education–welfare relationship. Conversely, health exhibited a negative effect on economic growth and an insignificant direct effect on welfare, though economic growth mediates its impact. These findings underscore the importance of sectoral efficiency and integrated development strategies. Research Implications: The study informs policymakers that enhancing education quality and aligning health workforce distribution with infrastructure are critical for maximizing economic and welfare outcomes. Implications extend to regional planning, human capital development, and poverty reduction strategies. Originality/Value: This research contributes by integrating education and health into a single structural model with district-level analysis, revealing their direct and mediated effects on welfare. The findings advance theoretical understanding and offer practical insights for targeted, inclusive development policies in resource-rich but socially lagging regions.