Urbanization and expenditure inequality in Indonesia: testing the Kuznets hypothesis with provincial panel data
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- Sagala, P., Akita, T. & Yusuf, A.A. Lett Spat Resour Sci (2014) 7: 133. doi:10.1007/s12076-013-0106-7
Focusing on Indonesia, this study analyzes the relationship between inequality and the process of urbanization. It performs 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.