IDEAS home Printed from https://ideas.repec.org/p/unp/sdgspp/201610.html
   My bibliography  Save this paper

Urbanization and Expenditure Inequality in Indonesia: Testing the Kuznets Hypothesis with Provincial Panel Data

Author

Listed:
  • Perdamen Sagala

    (Graduate School of International Relations International University of Japan)

  • Takahiro Akita

    (Graduate School of International Relations International University of Japan)

  • Arief Anshory Yusuf

    (Department of Economics, Padjadjaran University)

Abstract

Focusing on Indonesia, this study analyzes the relationship between inequality and the process of urbanization. Itperforms a panel data regression analysis to test the Kuznets inverted-U hypothesis for urbanization based on a provincial panel data set of 33 provinces over the period 2000-2009, constructed by using the core National Socio-economic Survey (core Susenas). Our results support the Kuznets inverted-U hypothesis, whether the Gini coefficient or the Theil indices are used as a measure of inequality. According to our estimates, expenditure inequality would reach the peak at an urbanization rate of around 46-50%. Since the 2010 urbanization rate is 50%, this indicates that expenditure inequality has already attained the peak value. Thus, further urbanization would decrease expenditure inequality, but all other things being equal.

Suggested Citation

  • Perdamen Sagala & Takahiro Akita & Arief Anshory Yusuf, 2016. "Urbanization and Expenditure Inequality in Indonesia: Testing the Kuznets Hypothesis with Provincial Panel Data," UNPAD SDGs Working Paper Series 201610, Center for Sustainable Development Goals Studies, Universitas Padjadjaran, revised Jun 2016.
  • Handle: RePEc:unp:sdgspp:201610
    as

    Download full text from publisher

    File URL: http://sdgcenter.unpad.ac.id/paper/201610.pdf
    File Function: First version, 2016
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Saith, A., 1983. "Development and distribution : a critique of the cross-country U-hypothesis," ISS Working Papers - General Series 18763, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    2. José De Gregorio & Jong–Wha Lee, 2002. "Education and Income Inequality: New Evidence From Cross‐Country Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(3), pages 395-416, September.
    3. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-625, April.
    4. Laszlo Matyas & Laszlo Konya & Lachlan MaCquarie, 1998. "The Kuznets U-curve hypothesis: some panel data evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 5(11), pages 693-697.
    5. Takahiro Akita & Alit Pirmansah, 2011. "Urban Inequality in Indonesia," Working Papers EMS_2011_04, Research Institute, International University of Japan.
    6. Takahiro Akita & Rizal Affandi Lukman, 1999. "Spatial Patterns of Expenditure Inequalities in Indonesia: 1987, 1990 and 1993," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 35(2), pages 67-90.
    7. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
    8. Huang, Ho-Chuan River, 2004. "A flexible nonlinear inference to the Kuznets hypothesis," Economics Letters, Elsevier, vol. 84(2), pages 289-296, August.
    9. Saith, Ashwani, 1983. "Development and distribution : A critique of the cross-country U-hypothesis," Journal of Development Economics, Elsevier, vol. 13(3), pages 367-382, December.
    10. Frazer, Garth, 2006. "Inequality and development across and within countries," World Development, Elsevier, vol. 34(9), pages 1459-1481, September.
    11. Mohammad Zulfan Tadjoeddin, 2013. "Miracle that never was: disaggregated level of inequality in Indonesia," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 12(1), pages 22-35, April.
    12. 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, June.
    13. Robinson, Sherman, 1976. "A Note on the U Hypothesis Relating Income Inequality and Economic Development," American Economic Review, American Economic Association, vol. 66(3), pages 437-440, June.
    14. Anthony Shorrocks & Guanghua Wan, 2005. "Spatial decomposition of inequality," Journal of Economic Geography, Oxford University Press, vol. 5(1), pages 59-81, January.
    15. Leigh, Andrew & van der Eng, Pierre, 2009. "Inequality in Indonesia: What can we learn from top incomes?," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 209-212, February.
    16. Ram, Rati, 1990. "Educational Expansion and Schooling Inequality: International Evidence and Some Implications," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 266-274, May.
    17. Ram, Rati, 1988. "Economic development and income inequality: Further evidence on the U-curve hypothesis," World Development, Elsevier, vol. 16(11), pages 1371-1376, November.
    18. Takahiro Akita & Sachiko Miyata, 2008. "Urbanization, educational expansion, and expenditure inequality in Indonesia in 1996, 1999, and 2002," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 13(2), pages 147-167.
    19. Anand, Sudhir & Kanbur, S. M. R., 1993. "The Kuznets process and the inequality--development relationship," Journal of Development Economics, Elsevier, vol. 40(1), pages 25-52, February.
    20. Abuzar Asra, 2000. "Poverty And Inequality In Indonesia," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 5(1-2), pages 91-111.
    21. Papanek, Gustav F. & Kyn, Oldrich, 1986. "The effect on income distribution of development, the growth rate and economic strategy," Journal of Development Economics, Elsevier, vol. 23(1), pages 55-65, September.
    22. Knight, J B & Sabot, R H, 1983. "Educational Expansion and the Kuznets Effect," American Economic Review, American Economic Association, vol. 73(5), pages 1132-1136, December.
    23. Knight, J B, 1976. "Explaining Income Distribution in Less Developed Countries: A Framework and an Agenda," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 38(3), pages 161-177, August.
    24. Jha, Sailesh K., 1996. "The Kuznets curve: A reassessment," World Development, Elsevier, vol. 24(4), pages 773-780, April.
    25. Campano, Fred & Salvatore, Dominick, 1988. "Economic development, income inequality and Kuznets' U-shaped hypothesis," Journal of Policy Modeling, Elsevier, vol. 10(2), pages 265-280.
    26. Ram, Rati, 1989. "Can educational expansion reduce income inequality in less-developed countries?," Economics of Education Review, Elsevier, vol. 8(2), pages 185-195, April.
    27. Luis Angeles, 2010. "An alternative test of Kuznets’ hypothesis," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 8(4), pages 463-473, December.
    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. Nguyen Minh Ha & Nguyen Dang Le & Pham Trung-Kien, 2019. "The Impact of Urbanization on Income Inequality: A Study in Vietnam," JRFM, MDPI, vol. 12(3), pages 1-14, September.
    2. Sui Chin Tan & Chong Mun Ho & Vincent Pang, 2016. "Why Has Education Inequality Widened in Sabah, Malaysia?," Economics Bulletin, AccessEcon, vol. 36(1), pages 569-575.
    3. Deepak Kumar Behera & Viswanathan Pozhamkandath Karthiayani, 2022. "Do globalization progress and sectoral growth shifts affect income inequality? An exploratory analysis from India," Regional Science Policy & Practice, Wiley Blackwell, vol. 14(2), pages 352-375, April.
    4. Iván González Gordón & Budy P. Resosudarmo, 2019. "A sectoral growth‐income inequality nexus in Indonesia," Regional Science Policy & Practice, Wiley Blackwell, vol. 11(1), pages 123-139, March.
    5. Kolomak, Evgeniya, 2020. "Urbanization and income inequality: Cause or solution?," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 59, pages 55-70.
    6. Tan, Sui Chin & Ho, Chong Mun & Pang, Vincent, 2015. "Education inequality: become better or worse?," MPRA Paper 61627, University Library of Munich, Germany.
    7. Eldes Natalya Hutagalung & Takahiro Akita & Mohamad Fahmi, 2019. "Inequality and Political Trust in Indonesia," Working Papers in Economics and Development Studies (WoPEDS) 201904, Department of Economics, Padjadjaran University, revised Nov 2019.
    8. Takahiro Akita, 2017. "Educational Expansion and the Role of Education in Expenditure Inequality in Indonesia Since the 1997 Financial Crisis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 130(3), pages 1165-1186, February.

    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 & Heryanah, 2013. "Educational Expansion and Inequality in Indonesia: Testing the Kuznets Hypothesis with Provincial Panel Data," Working Papers EMS_2013_18, Research Institute, International University of Japan.
    2. 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, June.
    3. Takahiro Akita, 2017. "Educational Expansion and the Role of Education in Expenditure Inequality in Indonesia Since the 1997 Financial Crisis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 130(3), pages 1165-1186, February.
    4. Jalil, Mohammad Muaz, 2009. "Re-examining Kuznets Hypothesis: Does Data Matter?," MPRA Paper 72557, University Library of Munich, Germany.
    5. Kanbur, Ravi, 2000. "Income distribution and development," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 13, pages 791-841, Elsevier.
    6. Takahiro Akita & Sachiko Miyata, 2020. "Urban and Rural Dimensions of the Role of Education in Inequality: A Comparative Analysis between Indonesia, Myanmar, and the Philippines," Working Papers EMS_2020_04, Research Institute, International University of Japan.
    7. Takahiro Akita & Sachiko Miyata, 2023. "Education and Expenditure Inequality in Indonesia and the Philippines: A Comparative Analysis in an Urban and Rural Dual Framework," Working Papers EMS_2023_03, Research Institute, International University of Japan.
    8. Bourguignon, Francois & Morrisson, Christian, 1998. "Inequality and development: the role of dualism," Journal of Development Economics, Elsevier, vol. 57(2), pages 233-257.
    9. 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.
    10. Andrés Rodríguez‐Pose & Vassilis Tselios, 2009. "Education And Income Inequality In The Regions Of The European Union," Journal of Regional Science, Wiley Blackwell, vol. 49(3), pages 411-437, August.
    11. Frazer, Garth, 2006. "Inequality and development across and within countries," World Development, Elsevier, vol. 34(9), pages 1459-1481, September.
    12. Dong‐Hyeon Kim & Ho‐Chuan Huang & Shu‐Chin Lin, 2011. "Kuznets Hypothesis In A Panel Of States," Contemporary Economic Policy, Western Economic Association International, vol. 29(2), pages 250-260, April.
    13. Takahiro Akita & Sachiko Miyata, 2008. "Urbanization, educational expansion, and expenditure inequality in Indonesia in 1996, 1999, and 2002," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 13(2), pages 147-167.
    14. Ayal Kimhi, 2004. "Growth, Inequality and Labor Markets in LDCs: A Survey," CESifo Working Paper Series 1281, CESifo.
    15. David Kiefer & Shahrukh Rafi Khan, 2003. "Revealed (or Imposed) Social Preferences for Equality and Growth," Working Paper Series, Department of Economics, University of Utah 2003_01, University of Utah, Department of Economics.
    16. Jeong, Hyeok, 2008. "Assessment Of Relationship Between Growth And Inequality: Micro Evidence From Thailand," Macroeconomic Dynamics, Cambridge University Press, vol. 12(S2), pages 155-197, September.
    17. Park, Kang H., 1996. "Educational expansion and educational inequality on income distribution," Economics of Education Review, Elsevier, vol. 15(1), pages 51-58, February.
    18. Dorji Lethro & Takahiro Akita, 2019. "The roles of education in expenditure inequality in Bhutan: an analysis in an urban–rural context," Asia-Pacific Journal of Regional Science, Springer, vol. 3(2), pages 465-485, June.
    19. Takahiro Akita & Raquel Celeste & Sachiko Miyata, 2023. "Why Has Inequality in the Philippines Declined? A Two-stage Hierarchical Inequality Decomposition Analysis by Location and Education," Working Papers EMS_2023_07, Research Institute, International University of Japan.
    20. Merter Akinci, 2018. "Inequality and economic growth: Trickle†down effect revisited," Development Policy Review, Overseas Development Institute, vol. 36(S1), pages 1-24, March.

    More about this item

    Keywords

    urbanization; expenditure inequality; Kuznets hypothesis; panel data regression; Indonesia;
    All these keywords.

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

    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:unp:sdgspp:201610. 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: Arief Anshory Yusuf (email available below). General contact details of provider: https://edirc.repec.org/data/sdgupid.html .

    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.