Determinant of income inequality in Indonesia

Akhsyim Afandi, Vebryna Permatasari Rantung, Hazem Marashdeh
2017 Economic Journal of Emerging Markets  
This study examines whether changing economic structure, social conditions, and financialization are responsible for increased income inequality in Indonesia. By employing panel data of 32 provinces in Indonesia that spans from 2007 to 2013, it finds that structural change affects income inequality, increased share of finance reduces inequality, which is against the financialization hypothesis, and social conditions have expected effects on income inequality. While an increased share of both
more » ... ed share of both agriculture and service sectors tends to reduce inequality, an increased share of manufacture sector has no effect on inequality. This study finds that falling poverty increases inequality, implying that policy to reduce poverty might not be neutral for inequality and instead cannot prevent it from increasing. Since the higher the college participation rate the higher income inequality tends to be, it does not automatically imply that in order to reduce inequality we need to reduce the number of people who go to college. It might be the case that the college participation rate has not reached a turning point, below which its increase increases inequality, but beyond which its increases reduces inequality. Abstrak Penelitian ini mengkaji pengaruh perubahan struktur ekonomi, finansialisasi, dan kondisi sosial terhadap ketimpangan pendapatan. Menggunakan data panel dengan cross-section 32 propinsi di Indonesia dan rentang waktu 2007-2013, penelitian ini menemukan bahwa perubahan struktural mempengaruhi ketimpangan, kenaikan sumbangan sektor keuangan dalam PDB cenderung menurunkan ketimpangan, yang berarti bertentangan dengan hipotesis finansialisasi, dan kondisi sosial juga berpengaruh terhadap ketimpangan. Sementara kenaikan sumbangan baik sektor pertanian maupun sektor jasa dalam PDB cenderung mengurangi ketimpangan, kenaikan sumbangan sektor industri terbukti tidak mempengaruhi ketimpangan. Studi ini juga menemukan bahwa turunnya tingkat kemiskinan justru manaikkan ketimangan, sehingga kebijakan untuk menurunkan kemiskinan bisa bersifat tidak netral terhadap ketimpangan, melainkan tidak mampu membiarkan ketimpangan untuk tidak naik. Juga ditemukan bahwa kenaikan angka partisipasi kuliah justru menaikkan ketimpangan, yang mengimplikasikan bahwa angka ini belum mencapai titik belok (turning point).
doi:10.20885/ejem.vol9.iss2.art5 fatcat:b3n5izcgnjatlf5gnclpdi5qpq