IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v15y2023i18p13709-d1239631.html

The Initial Impacts of the COVID-19 Pandemic on Regional Economies in Indonesia: Structural Changes and Regional Income Inequality

Author

Listed:
  • Takahiro Akita

    (IUJ Research Institute, International University of Japan, Minami-Uonuma, Niigata 949-7277, Japan)

  • Armida Salsiah Alisjahbana

    (Faculty of Economics and Business, Universitas Padjadjaran, Bandung 45363, West Java, Indonesia)

Abstract

The COVID-19 pandemic has exerted an enormous impact on the Indonesian economy. In 2020, the country’s economy contracted by 2.7%. However, the impact has been spatially heterogeneous. Based on provincial GDP across industrial sectors, this study examines how structural changes caused by the pandemic have affected the determinants of inter-provincial inequality in Indonesia by conducting a bi-dimensional inequality decomposition analysis. According to the bi-dimensional decomposition analysis, after the outbreak of COVID-19, the tourism sector reduced its contribution to inter-provincial inequality. On the other hand, the IC and financial services sectors were not affected by the pandemic and raised their contributions. When Indonesia recovers from the pandemic, it is likely that the tourism sector will regain its position as an important determinant of inter-provincial inequality. However, the most important sectors in determining inter-provincial inequality will be the IC, financial, and business services sectors, particularly in the Java–Bali region. With the rapid advancement of IC, financial, and e-business technologies, the roles of these high-inequality sectors are likely to increase unless policies that could facilitate spatial dispersion of these services and activities are implemented.

Suggested Citation

  • Takahiro Akita & Armida Salsiah Alisjahbana, 2023. "The Initial Impacts of the COVID-19 Pandemic on Regional Economies in Indonesia: Structural Changes and Regional Income Inequality," Sustainability, MDPI, vol. 15(18), pages 1-19, September.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:18:p:13709-:d:1239631
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/15/18/13709/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/15/18/13709/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-625, April.
    2. Servet Mutlu, 1991. "Regional Disparities, Industry and Government Policy in Japan," Development and Change, International Institute of Social Studies, vol. 22(3), pages 547-586, July.
    3. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
    4. Armida Alisjahbana & Takahiro Akita, 2020. "Economic Tertiarization and Regional Income Inequality in a Decentralized Indonesia: A Bi-dimensional Inequality Decomposition Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 151(1), pages 51-80, August.
    5. Tanti Novianti & Dian Verawati Panjaitan, 2022. "Income Inequality in Indonesia: Before and during the Covid-19 Pandemic," International Journal of Economics and Financial Issues, Econjournals, vol. 12(3), pages 29-37, May.
    6. 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.
    7. 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.
    8. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
    9. Asep Suryahadi & Ridho Al Izzati & Athia Yumna, 2021. "The Impact of Covid-19 and Social Protection Programs on Poverty in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 57(3), pages 267-296, September.
    10. Yogi Vidyattama, 2013. "Regional convergence and the role of the neighbourhood effect in decentralised Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 49(2), pages 193-211, August.
    11. John Gibson & Susan Olivia, 2020. "Direct and Indirect Effects of Covid-19 On Life Expectancy and Poverty in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 56(3), pages 325-344, September.
    12. Asep Suryahadi & Ridho Al Izzati & Daniel Suryadarma, 2020. "Estimating the Impact of Covid-19 on Poverty in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 56(2), pages 175-192, May.
    13. Mathur, Ashok, 1983. "Regional Development and Income Disparities in India: A Sectoral Analysis," Economic Development and Cultural Change, University of Chicago Press, vol. 31(3), pages 475-505, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Margareth Antonicelli & Carlo Drago & Alberto Costantiello & Angelo Leogrande, 2025. "Analyzing Income Inequalities across Italian regions: Instrumental Variable Panel Data, K-Means Clustering and Machine Learning Algorithms," Working Papers hal-05091404, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Takahiro Akita & Armida Salsiah Alisjahbana, 2023. "The Initial Impacts of the COVID-19 Pandemic on Regional Economies and Income Inequality in Indonesia: A Bi-dimensional Inequality Decomposition Analysis," Working Papers EMS_2023_02, Research Institute, International University of Japan.
    2. Armida Alisjahbana & Takahiro Akita, 2020. "Economic Tertiarization and Regional Income Inequality in a Decentralized Indonesia: A Bi-dimensional Inequality Decomposition Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 151(1), pages 51-80, August.
    3. Takahiro Akita & Awaludin Aji Riadi & Ali Rizal, 2019. "Fiscal Disparities in Indonesia under Decentralization: To What Extent Has General Allocation Grant(DAU) Equalized Fiscal Revenues?," Working Papers EMS_2019_05, Research Institute, International University of Japan.
    4. Carlos Mendez & Mitsuhiko Kataoka, 2021. "Disparities in regional productivity, capital accumulation, and efficiency across Indonesia: A club convergence approach," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 790-809, May.
    5. Takahiro Akita & Sachiko Miyata, 2018. "Spatial Inequalities in Indonesia, 1996–2010: A Hierarchical Decomposition Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 138(3), pages 829-852, August.
    6. Takahiro Akita & Awaludin Aji Riadi & Ali Rizal, 2021. "Fiscal disparities in Indonesia in the decentralization era: Does general allocation fund equalize fiscal revenues?," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(6), pages 1842-1865, December.
    7. 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, March.
    8. Yogi Vidyattama, 2016. "Inter-provincial migration and 1975–2005 regional growth in Indonesia," Papers in Regional Science, Wiley Blackwell, vol. 95, pages 87-105, March.
    9. Ragdad Cani Miranti, 2021. "Is regional poverty converging across Indonesian districts? A distribution dynamics and spatial econometric approach," Asia-Pacific Journal of Regional Science, Springer, vol. 5(3), pages 851-883, October.
    10. Mitsuhiro Hayashi & Mitsuhiko Kataoka & Takahiro Akita, 2014. "Expenditure Inequality in Indonesia, 2008–2010: A Spatial Decomposition Analysis and the Role of Education," Asian Economic Journal, East Asian Economic Association, vol. 28(4), pages 389-411, December.
    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.
    12. Gunawan, Anang & Mendez, Carlos & Santos-Marquez, Felipe, 2019. "Regional Income Disparities, Distributional Convergence, and Spatial Effects: Evidence from Indonesia," MPRA Paper 97090, University Library of Munich, Germany.
    13. Mendez-Guerra, Carlos & Kataoka, Mitsuhiko, 2020. "Disparities in Regional Productivity, Capital Accumulation, and Efficiency across Indonesia: A Convergence Clubs Approach," MPRA Paper 99322, University Library of Munich, Germany.
    14. Takahiro Akita, 2000. "Decomposing Regional Income Inequality Using Two-Stage Nested Theil Decomposition Method," Working Papers EMS_2000_02, Research Institute, International University of Japan.
    15. Miranti, Ragdad Cani & Mendez-Guerra, Carlos, 2020. "Human Development Dynamics across Districts of Indonesia: A Study of Regional Convergence and Spatial Approach," MPRA Paper 100479, University Library of Munich, Germany.
    16. Lehmann, Hartmut & Silvagni, Maria Giulia, 2013. "Is There Convergence of Russia's Regions? Exploring the Empirical Evidence: 1995–2010," IZA Discussion Papers 7603, IZA Network @ LISER.
    17. Takahiro Akita, 2002. "Income Inequality in Indonesia," Working Papers EMS_2002_02, Research Institute, International University of Japan.
    18. Alonso-Villar, Olga & del Río, Coral, 2010. "Local versus overall segregation measures," Mathematical Social Sciences, Elsevier, vol. 60(1), pages 30-38, July.
    19. Zhang, Bingqi & Nozawa, Wataru & Managi, Shunsuke, 2021. "Spatial inequality of inclusive wealth in China and Japan," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 164-179.
    20. Jolakoski, Petar & Pal, Arnab & Sandev, Trifce & Kocarev, Ljupco & Metzler, Ralf & Stojkoski, Viktor, 2023. "A first passage under resetting approach to income dynamics," Chaos, Solitons & Fractals, Elsevier, vol. 175(P1).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:15:y:2023:i:18:p:13709-:d:1239631. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.