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Does Trade Openness And Fiscal Policy Affect Inequality And Economic Growth? A Study In Indonesia

Author

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  • Mohammad KHUSAINI

    (Dr. in Economics, Faculty of Economic and Business, Brawijaya University-INDONESIA)

  • Setyo TRI WAHYUDI

    (Ph.D in Economics, Faculty of Economic and Business, Brawijaya University-INDONESIA)

  • Zamrud SISWA UTAMA

    (Master of Economics Student at Faculty of Economic and Business, Brawijaya University-INDONESIA)

Abstract

This paper examines the impact of trade openness and Indonesia's fiscal policy on income inequality and economic growth. The error correction model approach was used to analyze the effect during the period 1980 to 2015. The results show that trade openness can improve inequality but at the same time impede growth. The effect of fiscal policy on reducing inequality is only generated by tax collection but is temporary. Meanwhile, government spending on infrastructure and health proved to encourage growth. On the other hand, education sector spending and tax collection can actually hamper growth.

Suggested Citation

  • Mohammad KHUSAINI & Setyo TRI WAHYUDI & Zamrud SISWA UTAMA, 2018. "Does Trade Openness And Fiscal Policy Affect Inequality And Economic Growth? A Study In Indonesia," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 215-226, July.
    • Handle: RePEc:hrs:journl:v:x:y:2018:i:2:p:215-226
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade Openness; Inequality; Growth; Fiscal Policy;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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