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Local governments, through their own spending budgets, must intervene in improving the quality of human capital. Government spending on education and health is part of government spending that can encourage improvements in the quality of human capital. This study aims to determine the interaction relationship between government spending and human development. This research was conducted in 491 districts / cities in the 2010-2019 time period. The use of the Fully Modified OLS (FMOLS) analysis method with panel data. The results of this study indicate that the interaction of government spending on education and health has a long-term impact on improving the quality of human development. Government spending on education and health is known to have a positive effect on improving human capital. The importance of public investment for improving the quality of human capital through education and health so as to increase the standard of living and welfare of the community.

The purpose of this study is to investigate and analyze the efficiency and effectiveness of local government expenditure on education sector in districts and cities level of East Java, during the periods 2007-2014. Furthermore, this study will evaluate the impacts of local government expenditure, household expenditure for education, and regional product domestic bruto or (PDRB) on the educational outcomes, namely education index.Data Envelopment Analysis (DEA) is selected as the methodology for analyzing the efficiency of local government expenditure on educational outcome. The model assumes constant return to scale (CRS) and variable return to scale (VRS). Measurement of the effectiveness of government spending is done by using panel data regression. Data for supporting the analyses is panel data from 38 districts and cities in East Java for the periods of 2007 -2014. The results show that government expenditure in educational sector is relatively inefficient. Government Expenditure for Education (PPP) has no significant impact on educational index, while Household expenditure for education (PPRT) and GRDP per Capita positive has significant impact on the Education Index (IP). This imply that government expenditure for educational sector is not effective improving educational index.

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