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Structural Changes and Regional Income Inequality in Indonesia: A Bidimensional Decomposition Analysis

  • Takahiro Akita
  • Puji Agus Kurniawan
  • Sachiko Miyata

This paper analyzes the changes in determinants of inter-provincial income inequality in Indonesia from 1983 to 2004 associated with structural changes using the bi-dimensional decomposition method of a population-weighted coefficient of variation. The method unifies two inequality decompositions by regional groups and GRP components (industrial sectors) and thus enables us to assess the contributions of GRP components to within-region and between-region inequalities, as well as to overall inequality. As the share of mining has decreased, the spatial distribution of manufacturing has played a more important role in the inequality of Sumatra and Kalimantan, while the primacy of Jakarta, with strong urbanization economies, facilitated by globalization and trade and financial liberalization, has determined much of Java-Bali's inequality and, therefore, overall inequality in Indonesia.

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Article provided by East Asian Economic Association in its journal Asian Economic Journal.

Volume (Year): 25 (2011)
Issue (Month): 1 (03)
Pages: 55-77

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Handle: RePEc:bla:asiaec:v:25:y:2011:i:1:p:55-77
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  1. 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.
  2. 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.
  3. Sergio J. Rey & Mark V. Janikas, 2005. "Regional convergence, inequality, and space," Journal of Economic Geography, Oxford University Press, vol. 5(2), pages 155-176, April.
  4. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
  5. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-25, April.
  6. Stephane Mussard, 2004. "The bidimensional decomposition of the Gini ratio. A case study: Italy," Applied Economics Letters, Taylor & Francis Journals, vol. 11(8), pages 503-505.
  7. Takahiro Akita, 2002. "Regional Income Inequality In Indonesia And The Initial Impact Of The Economic Crisis," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 38(2), pages 201-222.
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