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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, 2013. "Urbanization and Expenditure Inequality in Indonesia: Testing the Kuznets Hypothesis with Provincial Panel Data," Working Papers in Economics and Development Studies (WoPEDS) 201318, Department of Economics, Padjadjaran University, revised Oct 2013.
    • Handle: RePEc:unp:wpaper:201318
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    Cited by:

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    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. Tan, Sui Chin & Ho, Chong Mun & Pang, Vincent, 2015. "Education inequality: become better or worse?," MPRA Paper 61627, University Library of Munich, Germany.

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    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

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