Why Do Differences in Provincial Incomes Persist in Indonesia?

Abstract

Despite 20 years of sustained economic growth that saw provincial GDPs rise and inequalities in per capita provincial GDPs fall, per capita income disparities among provinces persist. In this paper we present evidence that poor provinces have tended to catch up with middle- and high-income provinces, hut that regions at the top and bottom of the distribution in 1975 finished. In similar positions in 1993 lnvestments in human capital (education and health) seem to be the most effective way of increasing provincial incomes and reducing the disparities in provincial GDP per capita. The poorer provinces and rural areas can grow faster than the richer ones because they can gain the most from better health and education, they have the highest rates of illiteracy, fertility, and infant, child and maternal mortality.

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Lana Soelistianingsih

Revised version of a paper presented at the Second Conference of the Asian Society of Agricultural Economists (ASAE) in Bali, 6–9 August 1996. The views expressed in this paper are those of the authors and not necessarily those of the institutions with which they are associated.