Interprovincial Wealth Inequality by Factor Components in Indonesia

Abstract

This paper investigates three issues related to interprovincial inequality of household net wealth in Indonesia, that is, to identify whether the inequality is dominated by inequality within or between provinces, to identify the determinants of inequality, and the possible region groups formed as a result from the convergence or divergence in the household net wealth growth in Indonesia. Using data from five waves of the Indonesian Family Life Survey, the results suggest a declining inequality in household net wealth in Indonesia, dominated by the inequality within province. Education is the biggest equalising contributor to the inequality of household net wealth in Indonesia. We found the growth of household net wealth in Indonesia is converging within the club with the two clubs converging over time.

Keywords:

• inequality within province
• household net wealth
• club convergence

JEL Classification:

• I32
• O47
• R11

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Notes

1 A comparison of the decomposition of inequality by using half squared coefficient of variation (½CV²) and Gini Coefficient is in the appendix.