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

  • Takahiro Akita

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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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. 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.
  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. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-25, April.
  5. Bourguignon, Francois, 1979. "Decomposable Income Inequality Measures," Econometrica, Econometric Society, vol. 47(4), pages 901-20, July.
  6. 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.
  7. Tsui Kai-yuen, 1993. "Decomposition of China's Regional Inequalities," Journal of Comparative Economics, Elsevier, vol. 17(3), pages 600-627, September.
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