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

  • 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)

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.

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Paper provided by Department of Economics, Padjadjaran University in its series Working Papers in Economics and Development Studies (WoPEDS) with number 201318.

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Length: 21 pages
Date of creation: Oct 2013
Date of revision: Oct 2013
Handle: RePEc:unp:wpaper:201318
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