Spatial Inequalities in Indonesia, 1996–2010: A Hierarchical Decomposition Analysis
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This study analyzes spatial inequalities in Indonesia from 1996–2010 using the hierarchical decomposition method. It uses household expenditures rather than regional accounts and tries to investigate the contributions of spatial inequalities to overall expenditure inequality. We find that urban–rural disparity constitutes 15–25% of overall expenditure inequality. A large difference exists between urban and rural areas in the magnitude of inequality among districts. After controlling for the urban and rural difference, inequality among districts accounts for 15–25% of overall inequality. While disparity between five major island regions is negligible, inequalities between districts within provinces appear to have played an increasingly important role in both urban and rural areas. Given unequal geographic distributions of resource endowments, public infrastructure and economic activities, some spatial inequalities are inevitable. Nevertheless, sustained efforts are necessary to reduce spatial inequalities to facilitate national unity, cohesion and stability.
KeywordsSpatial inequality Expenditure inequality Hierarchical decomposition of inequality Theil index Indonesia
JEL ClassificationO15 O18 R12
The authors are grateful to the Japan Society for the Promotion of Science for its financial support (Grant-in-Aid for Scientific Research Nos. 15K03458 and 15K03473). Earlier versions of the paper were presented at the 4th PRSCO (Pacific Regional Science Conference Organization) Summer Institute in Bangkok, Thailand, June 27–29, 2016 and the 13th IRSA (Indonesian Regional Science Association) International Conference in Malang, East Java, Indonesia, July 25–26, 2016. The authors would like to thank Federico Revelli for his helpful comments and Heryanah for obtaining the necessary data for our analysis. The authors would also like to thank anonymous reviewers for their helpful comments.
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