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Financial Development and Income Inequality in Indonesia: A Sub-national Level Analysis

Author

Listed:
  • Harry Aginta

    (Bank Indonesia)

  • Debby A. Soraya

    (Bank Indonesia)

  • Wahyu B. Santoso

    (Bank Indonesia)

Abstract

This study constructs financial inclusion indicator and analyzes the link of financial inclusion and income inequality for 33 provinces in Indonesia. By using Fixed Effect Panel Model, we find financial inclusion appears to have insignificant effect to on inequality at national level. While at sub-national level, adding other variables such as GRDP, years of schooling, and trade openness, we find financial inclusion appears to have negative and significant impact on income inequality in manufacture and mining-based provinces, not in agriculture-based. The results suggest that financial inclusion helps to lower income inequality when economic condition encourage people to utilize financial access for productive purposes.

Suggested Citation

  • Harry Aginta & Debby A. Soraya & Wahyu B. Santoso, 2018. "Financial Development and Income Inequality in Indonesia: A Sub-national Level Analysis," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 64, pages 111-130, Desember.
    • Handle: RePEc:lpe:efijnl:201807
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    References listed on IDEAS

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