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Regional Income Inequality In Indonesia And The Initial Impact Of The Economic Crisis

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  • Takahiro Akita

Abstract

This paper estimates regional income inequality from 1993 to 1998, using a Theil index based upon district-level GDP and population data. Between 1993 and 1997, when Indonesia's annual average growth rate exceeded 7%, regional income inequality rose significantly. A two-stage nested inequality decomposition analysis indicates this was due mainly to an increase in within-province inequality, especially in Riau, Jakarta and West and East Java. In 1997, the within-province component represented about 50% of regional income inequality. The crisis caused per capita GDP growth to revert to its 1995 level, but the impact was spread unevenly across provinces and districts. In 1998 regional income inequality declined to its 1993-94 level. In contrast to 1993-97, three-quarters of the 1998 decline was due to a change in between-province inequality, with the Java-Bali region playing a prominent role. The crisis appears particularly to have afflicted urban Java and urban Sumatra.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Bulletin of Indonesian Economic Studies.

Volume (Year): 38 (2002)
Issue (Month): 2 ()
Pages: 201-222

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Handle: RePEc:taf:bindes:v:38:y:2002:i:2:p:201-222

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  1. Takahiro AKITA & Rizal Affandi LUKMAN & Yukino YAMADA, 1999. "Inequality In The Distribution Of Household Expenditures In Indonesia: A Theil Decomposition Analysis," The Developing Economies, Institute of Developing Economies, vol. 37(2), pages 197-221, 06.
  2. Tsui Kai-yuen, 1993. "Decomposition of China's Regional Inequalities," Journal of Comparative Economics, Elsevier, vol. 17(3), pages 600-627, September.
  3. Takahiro Akita, 2003. "Decomposing regional income inequality in China and Indonesia using two-stage nested Theil decomposition method," The Annals of Regional Science, Springer, vol. 37(1), pages 55-77, 02.
  4. Jorge Garcia Garcia & Lana Soelistianingsih, 1998. "Why Do Differences in Provincial Incomes Persist in Indonesia?," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 34(1), pages 95-120.
  5. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-25, April.
  6. Bourguignon, Francois, 1979. "Decomposable Income Inequality Measures," Econometrica, Econometric Society, vol. 47(4), pages 901-20, July.
  7. Mookherjee, Dilip & Shorrocks, Anthony F, 1982. "A Decomposition Analysis of the Trend in UK Income Inequality," Economic Journal, Royal Economic Society, vol. 92(368), pages 886-902, December.
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Cited by:
  1. Daniel Suryadarma & Rima Prama Artha & Asep Suryahadi & Sudarno Sumarto, 2005. "A Reassessment of Inequality and Its Role in Poverty Reduction in Indonesia," Development Economics Working Papers 22543, East Asian Bureau of Economic Research.
  2. Takahiro Akita & Puji Agus Kurniawan & Sachiko Miyata, 2011. "Structural Changes and Regional Income Inequality in Indonesia: A Bidimensional Decomposition Analysis," Asian Economic Journal, East Asian Economic Association, vol. 25(1), pages 55-77, 03.
  3. Hal Hill & Budy Resosudarmo & Yogi Vidyattama, 2008. "Indonesia'S Changing Economic Geography," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 44(3), pages 407-435.
  4. World Bank, 2003. "Decentralizing Indonesia : A Regional Public Expenditure Review Overview Report," World Bank Other Operational Studies 14632, The World Bank.
  5. Hiroshi Sakamoto, 2013. "Intra-regional Disparity and Municipal Merger: Case Study in Fukuoka Prefecture," ERSA conference papers ersa13p110, European Regional Science Association.
  6. Aloysius Gunadi, Brata, 2008. "Creating New Regions, Improving Regional Welfare Equality?," MPRA Paper 12540, University Library of Munich, Germany.
  7. Aloysius Gunadi Brata, 2004. "Spatial Dynamic Of Small And Medium Enterprises In The Recent Economic Crisis," Urban/Regional 0409003, EconWPA.
  8. Mitsuhiko Kataoka & Kodrat Wibowo, 2014. "Decentralization and Spatial Allocation Policy of Public Investment in Indonesia and Japan," Working Papers in Economics and Development Studies (WoPEDS) 201403, Department of Economics, Padjadjaran University, revised Feb 2014.
  9. Daniel Suryadarma & Wenefrida Widyanti & Asep Suryahadi & Sudarno Sumarto, 2006. "From Access to Income : Regional and Ethnic Inequality in Indonesia," Development Economics Working Papers 22547, East Asian Bureau of Economic Research.
  10. McCulloch, Neil & Sjahrir, Bambang Suharnoko, 2008. "Endowments, location or luck ? evaluating the determinants of sub-national growth in decentralized Indonesia," Policy Research Working Paper Series 4769, The World Bank.
  11. Mitsuhiro Hayashi & Mitsuhiko Kataoka & Takahiro Akita, 2012. "Spatial Dimensions of Expenditure Inequality and the Role of Education in Indonesia: An Analysis of the 2008-2010 Susenas Panel," Working Papers EMS_2012_21, Research Institute, International University of Japan.

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